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Overview of the Study



In a constantly changing world of today, where past is replaced by dynamic present and
the dynamic present is being replaced by more challenging future, the old ways of
doing things is no longer valid. Change is permanent and a reality. Those who are
not able to keep pace with the changes are destined to loose the race. Science and
technology is changing the way financial institutions perform their transactions.

Today’s banks are shaking by these technological changes. Life has never been so easy,
comfortable, and luxurious. Science and technology have brought our life to this stage.
But a new technology brings with it not only the potential for success but also a never-
ending series of questions regarding its design, its value to its users, ultimate use and
acceptability. For over a decade, Information technology has significantly affected the
banking industry Banks and other financial institutions have improved their functions as a
financial intermediary through adopting various information technologies. Generally
when the information technologies combine with functions of banks and financial
institutions, it is called electronic banking.

E-banking is a form of banking where funds are transferred through an exchange

of electronic signal between financial institutions, rather than exchange of cash,
checks, or other negotiable instruments. For many consumers, electronic banking means
24 hours access to cash through an ATM or direct deposit of paychecks in to checking
and savings accounts. Now in world which is becoming increasingly opens as a result of
the internet and www, Electronic-banking has been gaining ground around the globe. This
offers banking institutions a new frontier of opportunities and challenges further
augmenting competition in the global banking market. 1

Since the launch of Internet the large planet has become a smaller one. It has rendered
enormous impacts on business sectors. Remarkable development in ICT (Information
and Communication Technology) has introduced a global revolution in banking sectors.
The global trend in business arena set some challenges that cannot be fulfilled with the
help of the traditional banking system.

The survey of current banking system in Bangladesh reveals the fact that it requires rapid
modification and adaptation to keep harmony with the world economy business. It
becomes more obvious by observing the increased number of customers in some modern
banks while others are losing them. In the context of Bangladesh, a country of more than
140 million people, it is to be realized that there is no other option for us than to join the
current trend. Otherwise it is almost impossible to bring any sort of fruitful achievement
for the country.

At present, people are very often scared of doing any banking function with most of the
bank of Bangladesh. For, they still follow the traditional paper-based system. It, then,
becomes cumbersome to perform even a simple financial service such as account
checking. Therefore, the existing banking system in our country is awkward, slow and
error-prone. It, in one hand, fails to meet the customers’ demand and, on the other hand, it
causes some significant losses both for the banking authority and traders. Electronic
banking, on the other hand, solves the above problems. Furthermore, it opens up some
other salient aspects such as increased foreign trade and foreign investment.

In order to cope with the changing technology Southeast Bank pursuits E-banking
services such as Online banking, SMS Banking, ATM Card – Debit Card, Credit Card,
Live Payment of foreign remittance services keeping in mind to hold up their position in
the global competitive world providing better services that customer expect being a man
in the twenty first century. 2


The sensible motives of preparing the report on Issues of infrastructure development of

e-banking in Bangladesh are to depict the overall scenario of banking sector at a glance
with the light of ICT infrastructure through the following grounds:

I. To describe the different types of electronic banking system

II. To examine the present (2009-20010) status of E-banking in Bangladesh.
III. To identify various forms of E-banking available in Bangladesh
IV. To identify the problem areas of electronic banking in Bangladesh
V. To identify the key issues of infrastructure development of e-banking in
VI. To make the necessary recommendations to solve the problems of electronic
banking system


The paper is organized in the following manners:

• The first chapter describes the objective, rationale, importance, study area,
methodology and the limitation of the study.
• The second chapter gives a clear notion of the literature review of Electronic-banking
and the current state of Electronic-banking in Bangladesh
• The third chapter presents Electronic-banking in General
• The fourth chapter is organized with the light of the E-banking Services of South east
Bank Ltd.
• The fifth chapter consists of SWOT analysis and the findings and concluding remarks
of this paper are described 3


An immense development has been brought by the scientists in the field of information
technology. Electronic-banking is the innovative product of such advancement of
information technology. After this proliferation of technology what sorts of changes
found in the human civilization, how E-banking ripples the mind of the people at the
twenty first century, what the reacts towards the new technology of the society, how it
impacts the dimension of operations of the financial institutions and ability to provide
security about the customers confidentiality are the immanent driving forces behind me to
opt this topic and make a analysis.


Research goals is to make a feasible study at problems and issues, scrutinize investigate
interconnections of multifarious variables that remain surrounded us. Research produces
bodies of knowledge; contribute towards the development of literature of the professions
and academic disciplines. As a formal investigative process, research takes place at
different level of scientific sophistication or kinds of epistemology .So, research in
various branches of academic disciplines operate its study through its own different ways.
Research in Business Studies focuses on describing, understanding and interpreting
business phenomena and processes and how it affects the business entities and the
society. This study is based on both primary and secondary data.

A structured questionnaire has been used to get data on the demography and the behavior
of 50 personal banking consumers of the E-banks (Online-banks). The respondents were
chosen randomly while they were actively involved in banking transaction.

A structured questionnaire has also been used to get data on the demography and the
behavior of 50 personal of Southeast Bank consumers of the E-services of this bank.
Bank personnel were interviewed to collect data on the E-banking services offered by the
bank. 4

Bank’s websites had been the sources of getting information on the services offered by
those banks. Apart from them, for literature review different scholar’s journals, books and
internet had rigorously been used.

Internal Sources

• Southeast Bank's Annual Report

External Sources

• Different books and periodicals • Other published documents

related to the E-banking • Internet
• Bangladesh Bank Circulars • Online Journals
• Newspapers • Magazines (Star Campus)
• Website information • Bangladesh Bureau of Statistics
• Annual Reports(BTRC, BTCL etc.)
• International Telecommunication
Union (ITU)

No statistical tools are used. Only qualitative analysis is duly performed. For social-cost
benefit analysis simple mathematical calculations are done to cast the idea to the readers.


The limitations of my study are-

1. A country like Bangladesh is not so developed in the IT Sector. So I can not give a
clear notion of E-Banking of the country.
2. This is not fully E-banking because all transactions must be done by bank and
customer cannot make any transactions by his home PC.
3. Server utilization is not shown here under different loads.
4. Response time is not measured under different loads.
5. Complete information about how E-banking thrusts the bottom line of the income
statement is not available. 5

Literature review

Developing alternative distribution channels is not only important in terms of reducing

costs and improving competitiveness but also in terms of a financial institution’s ability to
retain the existing customer case (Kimball and Gregor, 1995) as well as to future attract
new customers.

With the extensive technology innovation and telecommunication, we have seen new
financial distribution channels increasing rapidly both in the numbers and form, from
ATMs, telephone banking, PC banking to internet banking. (Earring Wood and Story,
1996). Developing alternative distribution channels is not only important in terms of
reducing costs and improving competitiveness, but also in terms of financial institution’s
ability to retain the existing customer case.(Kimball and Gregor, 1995) as well as to
attract new customers. Sathye (1999) proposed a model for Internet Banking in Australia
is significantly influenced by variables of system insecurity, case of use awareness of
service and its benefits, reasonable price, availability of infrastructure and resistance to
change. The transformation from traditional brick-and-mortar banking to E-Banking has
been Automatic Teller Machine (ATM) and thus the retail banking industry witnessed
significant and extensive change. Formally, E-banking comprises various formats or
technologies, including telephone (both land line and cell phone banking, direct bill
payment (EFT), and PC or internet banking (Power, 2000). Weitzman, (2000), Lassar,
Manolits and Lassar, (2005), Ehou and Chou (2000) identified five basic services
associated with online banking: view account balances, and transaction histories, paying
bills, transferring funds between accounts, requesting credit card advance, and ordering
checks. Majority of banks of banks is planning to introduce ICT for integration of
banking service and new finance service, which will play a vital role in bringing
efficiency in financial sector (Raihan, 2001). The most commonly factors are ease of use,
transaction security, convenience and speediness (Wan, Luk and Chow, 2005).

Organization theorists and practioners have defined e-banking in various ways. A Survey
of Electronic Banking, Electronic Cash and Internet Gaming (2003), has defined 6

electronic banking as “an umbrella term for the process by which a customer may
perform banking transactions electronically without visiting a brick and mortar
institution”. The following terms all refer to one form or another of electronic banking:
personal banking,(pc) virtual banking, on line banking, home Banking, remote electronic
banking, and phone banking are the most frequently used designations, (Joris, Claessens,
Valentine Dem,2001),on line electronic banking system give every body the
opportunity for easy access to their banking activities.

Sathye (1999) proposed a model for Internet Banking Adoption, which argued that the
Intention of Internet Banking in Australia is significantly influenced by variables of
system insecurity, case of use awareness of service and its benefits, reasonable price,
availability of infrastructure and resistance to charge.

The Willis Report (1997 in Sathye, 1999) Stated that the technology must be reasonably
priced relative to alternatives for customers. Otherwise the acceptance of the new
technology may not be viable from customer’s stand point. Customers today are
more conscious of the expenses associated with the banking as they are generally better
informed about alternative option. The total costs incurred in using Internet Banking must
be minimal or competitive (Joyawardhena and foley, 2000).

Howard and Moore (1982) reported that consumers must be aware of the new brand
before adoption. Therefore it is important factor that the boxes have to create awareness
on internet banking to the consumers. Adoption means acceptance and continued use of a
product, service and idea. Customers go through a process of knowledge, persuasion,
decision and confirmation before they adopt the product or services.

Offer the internet banking; the greater the awareness level among customers and therefore
the higher will be internet banking adoption. Besides awareness, the service provided by
the banks should be perceived to be innovative with high quality and user friendliness to
meet an individual’s expectation. Cooper (1997) reported that case of use of innovation
product or service as one of the three important characteristics for adoption from the
customer’s perspective. This is related to user friendliness and ease of navigation as well
as simple institutions to use the service. 7

E-banking is the waves of the future. It provides enormous benefits to consumers in terms
of case and cost of transactions, either through internet, telephone or other electronic
delivery channels (Nsouli and Schaechter, 2002)

The clearing house generally provides the settlement of funds between member banks for
the following services:
• Cheque clearing
• Crediting employees’ wages directly into their accounts (GIRO)
• Processing of transfers and payments of bills
• Execution of other debit and credit transactions
The electronic linkages of banks with a clearing house will speed up local payment
processes. However, in order to provide international payments, banks need to have
a means to link up with international payment systems (Trade Finance Infrastructure
Development Handbook for Economies in Transition, P 97-110 )

According to BTRC the total number of Mobile Phone Active Subscribers has
reached 58.36 million at the end of May 2010. 8

According to BTRC the total number of PSTN Phone Subscribers has reached 1028.19
thousand at the end of May 2010.

Fig: Internet Growth Statistic in BD 9

A survey of electronic cash, electronic banking and internet gaming (2002) reported that
the term electronic cash, e-cash or e-money refer to electronic payment schemes that
enable consumer to store and redeem financial value. They operate via stored electronic
units of value. Paid for in advance by conventional money and representing equivalent
units in real currency, these funds can be transferred between vendors and individuals
using compatible electronic system, in some cases consumers report to banks or other
financial intimidators. E-cash (e-money) comes in two forms: smart card e-cash and
computer e-cash 10

Electronic-Banking in Bangladesh

3.1 Electronic Commerce

Electronic Commerce is an emerging concept that describes the process of buying &
selling or exchanging of products, services, & information via computer networks
including the internet. Globally, according to a survey conducted by IDC, currently the
electronic commerce over the Internet is some $26 billion, while it is expected to reach about
$1.5 trillion by 2008-09.

3.2 Electronic Business

Electronic Business (e-business) is connecting critical business systems &

constituencies directly via internet, extranets & intranets.

According to Lou Gerstner, IBM’s CEO: “E-business is all about cycle time, speed,
globalization, enhanced productivity, reaching new customers, sharing knowledge across
institutions for competitive advantage. ”

3.3 E-Money

E-money includes electronic debit and credit system, smart card. The smart card has been
defined many ways, but is generally defined as “portable data storage device with
intelligence (chip memory) and provision for identity and security.” In their simplest
forms, these cards are small microcomputers—lacking only external power supply,
displays, and keyboards. One of the most widely tested stored value cards offered by
Mondex, has an electric wallet, available as an optional accessory, with both of these
peripheral devices. The microprocessor chip in a stored –value card is specialized and
custom-designed, generally with specific patented control and production circuits.
Certain data, primarily related to the security of the card, can be entered only at the time
of manufacture. In addition to a microprocessor each card generally has several kilobytes
of permanent memory, both rewritable and non-rewriteable. 11

Although there has been significant effort made to eliminate paper-based payment
transactions, the basic way of handling payments by consumers has not changed. Stored
value cards may help to make the transition from paper-based payments to electronically
based payments more likely as these cards incorporate familiar aspects of using money in
a way that could prove to be both convenient and acceptable to the public.

The following chart exhibits the definition of E-Banking. 12

As money technology has evolved, methods of payment have also changed, but cash still
often remains a preferred method of payment by many people. Over the past few decades
various media and industry experts have predicted the demise of cash and the advent of
the “cashless” society. However, recent survey results showed that the preferred form of
payments by consumers and merchants was still cash. Table 1 presents the results of that

Preferred Forms of Payments By Consumers

Cash 54.2%

3rd Party Credit Cards (i.e., Visa) 38.5%

Check 23.4%

Store Credit Cards 6.5%

Debit Cards 1.0%
Others 1.1%

*Percentages will not add to 100%, due to format of questions asked.

Table-1: World-wide Preferred forms of Payments

The survey, conducted by Ernst & Young, showed also that 58% of retailers had a
preference for cash transactions. The evidence from this survey is noteworthy, as it is
easy to see the vast market potential for a product such as the smart card that is designed
to be a replacement primarily for cash transactions.

The number of cash purchases far exceeded any other payment method, although their
value accounts for less than 20 percent of the value of total consumer transactions on a
monthly basis. Cash is used most often at food stores, for purchases at gasoline filling
stations, and for dining out. The reasons given for using cash where that 1) it is
convenient for small, inexpensive purchases, 2) force of habit, and 3) the recipient
preferred or only accepted cash.

Even assuming that stored-value cards capture only a small fraction of their targeted
markets, the potential of the market for stored-value cards has been estimated to be 13

roughly the size of the market for traveler’s checks -$20 billion transacted annually,
although most consumer transactions represent only a small share of the total
expenditures. (Low income families are an exception to this statement).

3.4 E-banking
In its very basic form, e-banking can mean the provision of information about a bank and
its services via a home page on the World Wide Web (WWW). More sophisticated e-
banking services provide customer access to accounts, the ability to move their money
between different accounts, and making payments or applying for loans via e-Channels.
The term e-banking will be used in this book to describe the latter type of provision of
services by an organization to its customers. Such customers may be either an individual
or another business.

A large number of organizations from within and outside the financial sector are currently
offering e-banking which include delivering services using Wireless Application Protocol
(WAP) phones and Interactive Television (iTV).

3.4.1 Evolution of E-banking

There have been significant developments in the e-financial services sector in the past
30 years. According to Devlin (1995), until the early 1970s functional demarcation was
predominant with many regulatory restrictions imposed. One main consequence of this
was limited competition both domestically and internationally. As a result there was
heavy reliance on traditional branch based delivery of financial services and little pressure
for change. This changed gradually with deregulation of the in dustry during 1980s and
1990s, whilst during this time, the increasingly important role of information and
communication technologies brought stiffer competition and pressure for a faster pace of

The Internet is a relatively new channel for delivering banking services. Its early form
‘online banking services’, requiring a PC, modem and software provided by the financial
services vendors, were first introduced in the early 1980s. However, it failed to get
widespread acceptance and most initiatives of this kind were discontinued. 14

With the rapid growth of other types of electronic services since mid 1990s, banks
renewed their interest in electronic modes of delivery using the Internet. The bursting of
the Internet bubble in early 2001 caused speculation that the opportunities for Internet
services firms had vanished. The “” companies and Internet players struggled for
survival during that time but e-commerce recovered from that shock quickly and most of
its branches including e-banking have been steadily, and in some cases dramatically,
growing in most parts of the world. One survey conducted by the TechWeb News in 2005
(TechWeb News, 2005) found e-banking to be the fastest growing commercial activity on
the Internet. In its survey of Internet users, it found that 13 million Americans carry out
some banking activity online on a typical day, a 58 percent jump from late 2002.

The spread of online banking has coincided with the spread of high-speed broadband
connections and the increasing maturation of the Internet user population. Another factor
in e-banking growth is that banks have discovered the benefits of e-banking and have
become keener to offer it as an option to customers.

3.4.2 Importance of e-banking in Bangladesh

Many banks and other organizations have already implemented or are planning to
implement e-banking because of the numerous potential benefits associated with it. Some
of these major benefits are briefly described below.

 Choice and Convenience for Customers

 Attracting High Value Customers
 Enhanced Image of country & bank at a time
 Increased Revenues
 Easier Expansion
 Load Reduction on Other Channels
 Cost Reduction
 Result in greater efficiency and agility in organizations

3.4.3 Role of ICT in E-Banking 15

Banks are essentially intermediaries which create added value by storing, manipulating
and transferring purchasing power between different parties. To achieve this, banks rely
on ICT to perform most functions, from book keeping to information storage and from
enabling cash withdrawals to communicating with customers (see Table 3.1 for an
overview of ICT enabled changes). In developed countries at least, this high degree of
reliance on ICT means that banks spend a large chunk of their budget on acquiring as well
as maintaining these technologies. Internal as well as external pressures often result in
questions being asked about the return on ICT investments

Table -3.1.The Role of ICT in Banking (Adapted from Consoli, 2003)

Technological Events Service Provision Operational Function
Phases External Dimension Internal Dimension
• Processors to Database • The Cheque Guarantee • The cost of labor-intensive
(1945-1968) Card is introduced and use activities such as processing
• Magnetic Stripe (1965) of cheques become is reduced and the capacity
• First Credit Card in U.K. widespread to handle administrative
offered by Barclays Bank • The first Automated Bank tasks is enhanced;
(1966) Statements are printed • Use of computers is
• Facsimile machine (1966) • Money Transfer is mostly in the back-office of
• Database Management automated: more headquarters;
Systems (1967) transactions available in • Lack of specific software
branches. encourages the emergence
of new professional skills of
software development;
• Automated Machines to • Automatic Teller Machine • More branches are opened
Local arrive as a complement to retail
Networks (1968-1980) • Branches become branch distribution;
• Operating System with automated and services are • Financial resources are
multitasking (1969) now more easily accessible; sought and new skills are
• Arrival of Microprocessor • Real time operations at developed to support the
(1971) branches becomes a reality ATM;
• Microchip is integrated in • Customers can sort • Information systems
a plastic cards (1973) transactions in any branch provide quick and useful
• Personal Computer (1975) of their own bank; information for decision 16

• “Switching” technology in making;

telecommunication (1979)
• Standardization vs • Gold Credit Cards are • Number of branches is
Customization (1980- offered to selected reduced: the personnel is
2007) customers; requalified and is given a
• Networking Software • Banks introduce telephone more prominent role;
(1980) Banking • CRM systems (described
• Microchip is used in a • Introduction of Debit in Chapter IV) developed to
telephone card (1982) Cards help marketing;
• File Transfer Protocol • Non payment services are • LINK Interchange
(1985) introduced (i.e. mortgages, Network Ltd (LINK)
• ITS implemented as major pensions); formed as a company jointly
technology for network • Internet Banking is owned by banks to expand
connection (1988) introduced and becoming distribution channels;
• Wide use of Internet an prominent
wireless technologies in
banking (1990s and 2000s)

A focus on ROI reveals that ICTs provide a very limited return unless accompanied by
changes in organizational structures and business processes. These changes also need to
be followed by a diversification of service offerings, with many banks introducing new
product lines such as credit cards, stock brokerage and investment management services.
Thus ICT has mostly enhanced productivity as well as increased the choice for customers
both in terms of variety of services available and the ways in which they are able to
conduct their financial activities

3.4.4 Various Forms of E-Banking

Electronic Data Interchange (EDI): 17

EDI is a technique used to communicate business, financial and transaction information

between computer systems of different organizations and their business partners. Unlike
email, it is structured communication and sent in machine process able form. EDI was
first used in North America by retail industries in the late 1960s. In mid-1980s EDI was
introduced in other areas including automotive, manufacturing, distribution and tourism
In banks, Financial EDI (FEDI) is mostly used to settle the bills with the objective of
‘making the right financial resources available at the right time’. Banks can play a vital
role in FEDI for the payments in real time. Banks have to interact with the systems of
customers on one side and the service providers on the other side. It enables the
customers to view/ download account details. EDI implementation in banks results in
 reduced cost,
 improved efficiency and
 Customer satisfaction resulting in improved growth and

Automated Teller Machine (ATM)

An ATM is simply a data terminal with two input and four output devices. Like any other
data terminal, the ATM has to connect to, and communicate through, a host processor.
The host processor is analogous to an Internet Service Provider (ISP) in that it is the
gateway through which all the various ATM networks become available to the cardholder
(the person wanting the cash). ATM has two input devices- card reader and keypad. An
ATM has four output devices- Speaker, Display screen, Receipt printer, cash dispenser. 18

Electronic Clearing Service (ECS):

The primary goal of any national payment system is to enable the circulation of money in
its country. The payment system should be efficient and secure. The ECS is created to
establish safe, secure, sound and efficient payment and settlement systems for the
country. It can be divided into two categories namely, Credit Clearing and Debit Clearing.
The ECS credit clearing is a mode of payment electronically instead of paper warrants.
Through this ECS credit clearing, an institution makes a large number of payments like
salaries, pension, interest, dividend to a large number of employees/ex-
employees/investors/share holders.

Plastic Card Currency

Plastic cards also known as plastic currency involving electronic device in their
functioning is gaining popular as a convenient mode of payment. By using these plastic
card, financial exchanges takes place on line between buyers and sellers. This exchange is
in the form of digital financial instrument such as credit card numbers and debit card
numbers backed by a bank or an intermediary. Recently several innovations helped to
simplify consumer payment which includes Credit Cards, Debit Cards, ATM Cards and
Smart Cards.

Credit Card
Credit Card can be called as an equivalent of a loan sanctioned by the bank to its
customers. Credit card facilitates and makes it possible to “Use First and Pay Later” the
specified amount of credit as per the agreed terms of sanction. Before issuing the card, the
bank would like to know and be sure the identification, age, level and source of income
and repaying capacity. This card facilitates the cardholder to purchase goods and services
from the merchant establishments and shops through the collaborating credit card
companies like VISA, MasterCard, Maestro, and Cirrus. Interest will be charged by the
bank on monthly basis for the credit provided through the card. And service charges also
will be collected from the cardholder for the transaction and processing.

Debit Card
A Debit Card provides for online electronic payment like Credit Card but from savings or
current accounts of the cardholder for purchases. This card is a deposit access product 19

where cardholder uses his own money in his bank account through the debit card on the
principle of “Pay First and Use Later”. Debit card can be used to make purchase at retail
shops and merchant establishments in the same way as the credit card is used. But in
order to use the debit card, the cardholder must have sufficient balance in his/her account.
Debit card contains the symbol or hologram of collaborating company such as VISA,
MasterCard, Maestro and Cirrus etc.

ATM Card
As mentioned earlier, ATM Card can be used to withdraw money, deposit money,
balance enquires, deposit bills in the account. The cardholder must maintain a savings
bank account or current account with the bank. On issuance of card, the cardholder is
intimated a four digit secret Personal Identification Number (PIN). The cardholder is
always required to maintain safely the PIN to prevent fraudulent activity.

ATM Card-cum-Debit Card

ATM Card-cum-Debit Card can be used both as an ATM card and Debit card as a method
of payment when purchasing goods and services in Bangladesh and Overseas. The
cardholder is responsible for all transaction made by the use of the card. In Bangladesh
most of the debit cards issued by banks are also ATM cards. For example, DBBL, SCB,
HSBC, BRAC Bank and other banks operating in Bangladesh provides ATM Card-cum-
Debit Card.

Smart Card
The smart card is an amazing piece of technology. It is the size of a regular ATM card but
is capable of storing over a 1000 times more data. The data can be encrypted and hence
the card is completely temper-proof. The card can also be personalized to the holder by
printing personal and other details on the card face. Mart card is issued to the formers to
provide adequate and timely credit support for their cultivation needs including all
purchases. The formers can use this card wherever they needs. The loan amount
sanctioned to the former will be recorded in the card. The merchants can sell the goods to
the former based on the card and they can collect the amount from the local branch of the
issued bank or any other bank. 20

Internet Banking
Internet banking is a web-based service that enables a customer access his account by
logging in to the bank’s website with the help of a bank-issued identification and a
personal identification number. The concepts of e-banking and internet banking are
synonymous, though banking activities carried out through the internet just constitute a
part of the whole gamut of e-banking indeed.
Internet banking would free both bankers and customers of the need for proprietary
software to carry on with their online banking transactions. Customer behavior is
changing rapidly. Now the financial service is characterized by individuality,
independence of time and place and flexibility. These facts represent huge challenges for
the financial service providers. So the Internet is now considered to be a ‘strategic
weapon’ for them to satisfy the ever-changing customers’ demand and innovative
business needs Adequate legal framework and maximum security are the two essential
factors for Internet banking. The comprehensive security infrastructure includes layers of
security from the network to the browser, including sophisticated encryption that protects
customers’ from intrusion when they access the bank over the public network. Actually
mobile banking is a variation of Internet banking.

SMS Banking
SMS Banking allows you to do some banking enquiries on your mobile phone. SMS
Banking is developed to provide transactions related to client’s card account via SMS.
After having registered the service SMS-Banking, a (mobile Phone) subscriber should
send an SMS to 611(say) with a request for appropriate transaction. The above SMS must
contain (with space between commands):
• A type transaction
• Individual access code for working with “SMS-Banking”
• A sum to be paid (if payment transaction)
• Identifier of payment (debt)
• Identifier of data.
In reply the subscriber will receive a message reporting the result of the transaction made.
It is possible to use “SMS-Banking” abroad provided that international calls and roaming
are activated. SMS must be written in Latin letters. There is no subscription fee for the
service. The SMS-s to number 611 is charged in accordance with the company tariffs. 21

The mobile company may charge for SMS and Bank may charge for service. It is option
of Bank who provides this service. A type of request is: <transaction type> blank <access
code>blank <the amount of payment>blank<payment identifier> blank<data
identifier>the data of the request should not be put in brackets/ inverted commas.

Tele-banking is a form of remote banking which is essentially the delivery of branch
financial services via telecommunication devices where the bank customer can perform
retail transactions by dialing a touch-tone telephone or mobile communication unit, which
is connected to an automated system of the bank by utilizing Automated Voice Response
(AVR) technology. Tele-banking has been in Bangladesh since 1990s. The use of Tele-
banking is easy and confidential. All you need is a push button telephone, your account
number, and you’re Personal Identification Number (PIN), which you select on your first
call and can change at any time. Tele-banking will provide you the following services:
• Checking account balance
• Interest rates related information etc.

Online Banking
Banks are considering online banking as a powerful “value added” tool to attract and
retain new customers while helping to eliminate costly paper handling and teller
interactions in an increasingly competitive banking environment. Online banking
(Internet banking) is a term used for performing transactions, payments etc. over the
internet through a bank’s secure website. This is very useful especially outside banking
hours. In most cases a web browser such as Internet explorer or Netscape Navigator is
utilized and any normal internet connection is suitable. No special software or hardware is
usually needed.

Virtual Banks
Virtual banks are banks without bricks; from the customer perspective, they exist entirely
on the Internet, where they offer the same range of services and adhere to same rules and
regulations of central banks.

Factors to be considered in Virtual Banking 22

• The routine banking transaction was becoming both costly and time consuming. The
banks resorted to computerization to cut cost and time overheads in handling routine
• The introduction of automated teller machine (ATM) impart flexibility to bank
customers and gave further boost to virtual banking
• The introduction of credit cards and debit cards helps both the consumers and retailers
to be free from cash handling

Call Center
Call center is a streamlined customer interface and offers a range of banking services
through its call center agents. Customers are now getting improved services at a reduced
cost in an exciting manner. Available services at call center are:

Account related services:

Balance inquiry, transaction inquiry, duplicate statement, cheque book request,
ATM/Debit card hot listing, and loan outstanding etc.

Product Information:
Deposit accounts, Personal loan, Savings and current accounts, Debit card, Rates and
tariff Inquiry, exchange rates, lending rates, deposit rates, tariff etc.

Payment is generally understood as a transfer of fund from the one person (payer) to other
person (Payee). In E-payments, the funds are transferred through electronic mode. The
following are some of the E-payment system.

Banknet is a communication backbone connecting various centres of a country to
facilitate the transfer of inter-bank or inter-branch messages. Most of the centres of a
country are being brought on the network. The main objective of the Banknet is to
speedup the process of transfer of funds from one bank to another bank and one branch to
another branch. 23

The society for System for Worldwide Inter-bank Financial Telecommunication (SWIFT)
provides reliable, secured and expeditious telecommunication facilities for exchange of
financial messages all over the world. It operates 24 hours on all days. The banks have to
become the member of International Financial Messages Communication Network. The
banks can do foreign exchange business safely and secured mode. We can say, the foreign
exchange business which the banks are conducting today would not have been possible
without SWIFT. Most of the central banks world-wide use the message standard provided
by SWIFT for the purpose of automatic clearing house activities.

Electronic Fund Transfer (EFT):

EFT system permits transfer of funds from any account at any branch of any member
bank in any city to any other account at any branch of any member bank in any other city.
This system utilizes the Service Branches of the member banks. It facilitates the transfer
of funds from one place to another place within the country quickly and safely. Banks
collect service charges from the customers.

Remittance (Electronic Way)

Today’s fast changing electronic banking channels have massively improved the flow of
remittance across the world. In Bangladesh, Banks have grown up relations with many
international financial agencies, or intermediaries to master the inflow of remittance into
the country from the expatriates working in foreign countries. A few such operators
working in Bangladesh are: Western Union Money Transfer, Money Gram, Xpress
Money, Ria, Transfast(TF), KMB,KFE, RMC.

21st century E-Banking Services

Customer can expect some other E-Banking services from a e-bank. Following are some
E-Banking services:
• Access our bank accounts • Receive Healthcare
• Transfer money • Order medicines
• Make investment • Personalization or Customization
• Pay Bills services

• Apply for loans and mortgages • ATM Rebates 24

• File tax returns • Marketplaces and Shopping Galore

• Purchase goods and services • Options to Purchase Certificate of
• Top-up mobile phones Deposit

• Sign contracts • Mortgage Applications

• Change addresses • Credit Card Applications

• Track parcels and shipments • Financial Planning Services

• Access governmental services • Insurance Sales Options

• Collect dividend • Ability to Interface With One’s

• Vote Existing Software

• Play online games • Twenty-Four-Hour Telephone

Access to a Real Banker
• Gamble
• Internet Access
• Bet
• Helpful Information for Tax
• E-procurement

3.5. Issues/ Problems of E-Banking

3.5.1 Technology Related Problems

IT and Telecommunication Infrastructure Issues

At present, the availability of e-banking is substantially greater in developed countries
than in developing economies. Many developing countries do not have the necessary
telecommunications, banking, commercial, bureaucratic and legal infrastructures to
support the widespread introduction of e-banking (Simpson, 2002). Access to the Internet
is a major problem in the developing world, and presents an obstacle to the growth of e-

Capacity/Scalability Problems
It is difficult to predict the usage of e-banking on an hourly or daily basis. These
‘scalability problems’ can give rise to a slowing down of the website, or even a website
crash (temporary unavailability). This can cause many reputation problems and financial
damage. Some of the ways of addressing this problem according to Seargeant (2000) are:
• Undertake market research to predict demand, 25

• Adopt systems with adequate capacity and scalability,

• Undertake proportionate advertising campaigns, and
• Ensure adequate staff coverage and develop a suitable business continuity plan
which not only helps coping with scalability problems but with other causes of
systems failure.

A number of other technical solutions are also available to address this problem but
owing to the high cost associated with them, some banks do not implement them.
Availability and Systems Integration
One of the basic requirements of e-banking services is their 24-hour availability. This
often requires e-banking applications’ integration with legacy systems, which were
designed to provide services during only specified periods, often with suspension of
services at other times for various reasons such as data backups and end-of-day
processing (Mohamed & Al-Jaroodi, 2003). Usual legacy systems are accounting,
banking, payroll, customer information, product management (such as current accounts or
savings accounts), and inventory systems. The new business applications are often not
built from scratch and they normally rely on the functionality of the existing legacy

Incompatibility between e-banking applications and legacy systems means that most
banks require middleware to integrate these systems, which can be expensive and may
bring its own set of problems. Systems integration has been and is still, to some extent, a
key barrier in e-banking. As pointed out in (Shah et al, 2007; Shah & Siddiqui, 2006),
shortcomings in technological infrastructure are often the biggest hurdle in the
implementation of e-business channels and their integration with other parts of a business.
This type of integration is essential for the success of e-banking, as an electronic request
for a typical financial transaction passes through a number of different systems before an
action is complete.

Web Site Design and Operational Functionality

There is considerable weight attached to the appropriate design of e-banking websites.
Poor design of website has been estimated to result in the loss of up to 50 percent of
potential repeat visits (Cunliffe, 2000). Poor design may include use of inappropriate
colours, contrast, font or navigation functions. Lack of proper functionality, excessive use 26

of graphics or other similar factors can also deter customers from coming back to that
website. Web usage barriers can also be attributed to vision, cognition, and physical
impairments associated with the normal aging process.
Vision changes include a decline in visual acuity resulting in inability to see objects on a
screen clearly, decreased capacity to focus at close range, or increased sensitivity to glare
from light reflecting or shining into the eye. These physiological changes, and many
others, impact the users ability to see Web objects and read online content (Becker,
2005). These factors need to be taken into account when designing a website as aging
population in most industrialized counties means that this segment is increasing in size.
These are the people who might need the online services most due to mobility issues.
Several software tools, including Dottie and Usability Enforcer, are available for senior-
friendly web sites.
Poor website design can also result in decreased trust in using online financial services as
look and feel often creates a lasting impression. This issue is further covered in greater
detail below in the section on trust issues.

3.5 .2 Management Problems

Regulatory Issues
As the Internet is a global medium, it creates opportunities for trading on an international
basis, but every country has its own laws and regulations concerning the provision of
financial services. The issue of preventing money laundering, which is considered to be
the main source of finance for terrorism and other related criminal activities, has further
complicated the situation. This is one of the major problems in expansion of e-banking
services on a global basis.

Information Management
Good information management enables organizations to become more effective in their
operations as it provides the information employees need to analyze and conceptualize
information, thereby adding to the firm’s store of knowledge and making their jobs more
meaningful and efficient. This gives employees an opportunity to add value to the
organization’s products and services (Blount et al. 2005). In online services operations,
good information can be a vital difference between success and failure. However
managing information has been a problem for organizations across many industries.
. 27

Outsourcing Problems
Development or implementation of e-banking systems and other technical tasks such as
upgrading and integrating existing legacy systems are very complex. They require very
high levels of technical and project management competence to carry out without outside
help. Even the best companies need to recognize the limitations of their expertise and
when to outsource certain e-Commerce functions (Hirsh, 2002).

Outsourcing vs. in-house e-commerce systems development

Outsourcing In-house System Development

Advantages • An attractive option for • Development of in-house
replacing legacy systems expertise
• Low risk • Flexibility
• Known costs • Own developers have better
• Expert support from vendors understanding of business
• Easier upgrades • Less changes may be required
• Ability to focus on core in business processes
business issues • Unique processes may lead to
competitive advantage
Disadvantages • Possible inflexibility • High risk strategy
• High external consultancy • High costs
Costs • High training expenses
• Difficult change management • Difficult and costly upgrades.

Security related issues are a major source of concern for everyone both inside and outside
the banking industry. E-banking increases security risks, potentially exposing
traditionally isolated systems to the open and risky world of Internet. According to
McDougall (2007) security problems can mainly be categorized as; hacking with criminal
intent (e.g. fraud), hacking by ‘casual hackers’ (e.g. defacement of web sites or ‘denial of
service’ - causing web sites to slow or crash), and flaws in systems providing
opportunities for security breaches (e.g. a users is able to transact on other users’ 28

accounts). These threats have potentially serious financial, legal and reputational risks
associated with them. Luckily actual financial losses from these breaches have been very
low in comparison to (say) credit card frauds. Financial regulators also demand a very
high standard of security from banks.
Information is a valuable asset and to fully utilize it needs wide availability at least within
an organization. However security requirements might hinder wider information sharing.
In an e-banking environment, security threats largely fall into the following categories:

• Login detail disclosure: This is most basic threat to the financial system. Using a
number of means, criminals acquire login details, such as a customer number, pin, and
use it to access the account and steal money from it.
• Computer spy viruses: These are computer programs which are circulated through
email or other means. Once a customer opens a malicious email a program is
automatically installed in his/her computer.
• Dummy sites: Here customers are lured to the dummy or look alike website. These
website look very similar to a bank’s website, and when login details are entered, these
are recorded and used for criminal activities.

McDougall (2007) suggests that banks need as a minimum to have:

• A strategic approach to security, building best practice security initiatives into systems
and networks as they are developed;

• A proactive approach to security, involving active testing of security systems, controls

(e.g. penetration testing), planning response to new threats and vulnerabilities and regular
reviews of internal as well as external threats.

• Sufficient staff with security expertise and responsibilities;

• Regular use of system based security and monitoring tools. 29

• Continuity plans to deal with aftermaths of any security breaches.

Phishing for Bank Customers has Boomed

Phishing involves using fake websites to lure people into revealing their bank account
numbers. The amount stolen is still relatively small but it is set to go up. The criminals
behind “phishing” scams were also becoming increasingly “industrialized” in their

Loss of Personal Relationship

Another key barrier in e-banking is a lack of personal contact between customers and
banks. Harden (2002) suggests that e-channels erode a direct relationship with customers
as compared with traditional over-the-counter banking: e-banking does not offer face-to-
face contact in what is essentially a one-to-one service relationship.
To compensate, e-banks must deliver higher quality services in order to compete with
other service delivery channels (Liao & Cheung, 2005).

Organizational Structures and Resistance

The introduction of e-banking can generate conflicts and morale problems as changes
required to succeed in e-banking may have profound effects on the way an organization is
structured. Four interrelated types of organizational change: • Process change, •
Structural change, • Cultural change, • Political change affect e-banking
Trust Issues
Lack of consumer trust is a major hurdle in the growth of e-banking. Although winning
consumer trust is more important in online environment, online trust does share a number
of characteristics with the offline trust. Wang (2005) categorized these characteristics in
the following categories:

• Trust and trustees: The two parties, trustier and trustee, are vital for establishing a
relationship. In an online environment, a website, or rather the trader behind it, is a trustee
and a consumer is a thruster.

• Vulnerability: Offline traders usually have a physical presence which reduces the sense
of vulnerability but the anonymity associated with the online world leaves consumers
feeling more vulnerable. This is not just about vulnerability to fraud but also loss of 30

privacy, because every move made by a consumer can be recorded and analyzed to assess
their behavior.

• Produced actions: A consumer action may include just visiting a website for
information or purchasing a product, often providing credit/debit card as well as other
personal information such as home address. Both of these action benefit traders in terms
of a potential sale or an actual sale. To provoke these actions, a trader must do a number
of things – discussed below – to create trust in consumers’ mind.

• Subjective matter: Trust is a subjective matter. Some people will trust easily whereas
others will not trust no matter what. The majority of consumers, however fall, somewhere
in between, and can be persuaded to trust even a virtual trader. Basically, trust is a
psychological state of mind when the person is willing to accept the risks involved. When
the perception of benefits out weigh the risks in the relationship, the person enters into a
trusting relationship (Carr, 2007).

Adoption/Acceptance Issues
From an organizational point of view, failing to successfully adopt e-business initiatives
originate from a combination of unclear business vision for e-business and lack of
technological expertise amongst other factors. Other factors include: uncertainty of
financial benefits, limited size of target market, lack of time/resources to start new
projects, and high costs of computing technology, organizational issues like top
management short-sightedness and longstanding internal barriers.

Clash With Other Services Delivery Channels

Although e-banking promises to be more cost effective and efficient than other channels
such as branch or phone banking, it may also cannibalize these other channels.
In the short term a cheaper channel replacing an expensive one looks attractive, but in the
long run it may cost banks an established and loyal customer base. For this reason many
banks treat e-banking as only an extra channel, a factor which could mean that growth of
e-banking is much slower than many expected.

Change Management Issues 31

One of the main problems established organizations encounter when considering e-

banking adoption is organizational change.
Technology adoption is usually slow if too much attention is paid to technical aspects,
rather than business processes and social issues. Some companies sell their e-commerce
projects as ‘pilot’ or ‘learning’ vehicles and leave it’s development to the IT department
and many senior executives equate ‘going online’ with a specific technology in mind
rather than using digital technologies to implement their organization’s strategic
objectives. Going online is about serving customers, creating innovative
products/services, leveraging organizational talent, achieving significant improvements in
productivity, and increasing revenues. High start up cost of e-banking also deters some
banks to delay its implementation..

Ethical Issues
Consideration of the ethics of e-banking have mainly focused on areas relating to the
use/abuse of information collected through analyzing online customer behavior.
In this context the main issues may include security/privacy of information about
individuals, accuracy of information, ownership of information and intellectual property,
accessibility of information held and what uses of this information are ethically
acceptable. These relate to: freedom of choice; transparency; facilitating fraud
(ethical/illegal activities of others).

3.6.1 Crimes on E-Banking:

1. Unauthorized access into network system. 2. The use of the layning devices
3. The implementation of computer viruses and other ways of disturbance.
4. Deactivate protected equipment
5. Forming, transferring, accepting, transforming, displaying and keeping some
6. Access in the restricted automated systems.
7. Monitoring the protection of the software integrity.
8. Registration (logging) with reference to the forbidden resources
9. Cryptographic methods (Hiding information of computer system.) 32

3.6.2 Provisions regarding E-Banking crime:

According to ICT act 2006

1. Sec 56 Hacking or access without authorization

If any person:

A) Does any kind of offence knowing, it will hamper the resource, erase or change any
computer system which will loss public assets.
B) Access into any computer, server, network system without authorization.

It should treat as hacking crime/offence.

Penalty: Maximum 10 year, one 1, 00, 00,000 taka or both of this penalty

2. Sec 61 penalty of accessing in restricted system

Unauthorized access into any computer system knowing that it is restricted by controller
of government should be treated as unauthorized access.
Penalty: Maximum 10 year, 1, 00,000 taka or both of this.

3. Sec 54 penalty of destruction into computer, computer system, etc

Damage any file, resource, document, data, program, network system should be treated as
a crime.
Penalty: Maximum 10 year, 1, 00,000 taka or both of this.

4. Sec 55 penalty of cracking

If any body does any hamper to any source code, hide code and desolate of any computer,
computer program, computer system and computer network or does by another body will
be treated as cracking offence/crime.
Penalty: Maximum 3 year, 3, 00,000 taka or both of this.
According to penal code of Bangladesh:
Sec 03: Punishment of offences committed beyond, but which by law may be treated
within, Bangladesh. 33

E- Banking Infrastructure & its Development in Bangladesh

4.1 Introduction
The Internet has provided a new and inexpensive channel for banks to reach out to their
customers. It allows customers to access banks’ facilities round the clock and 7 days a
week. It also allows customers to access these facilities from remote sites/home etc.
However, all these capabilities come with a price. The highly unregulated Internet
provides a less than secure environment for the banks to interface. The diversity in
computer, communication and software technologies used by the banks vastly increases
the challenges facing the online bankers. In this chapter, an effort has been made to give
an overview of the technologies commonly used in e-banking infrastructure. An attempt
has been made to describe concepts, techniques and technologies related to privacy and
security including the physical security. Security is one of the key issues in infrastructure

Infrastructure is the basic physical and organizational structures needed for the
operation of a society or enterprise, or the services and facilities necessary for an
economy to function. The term typically refers to the technical structures that support a
society, such as roads, water supply, sewers, power grids, telecommunications, and so
forth. Viewed functionally, infrastructure facilitates the production of goods and services;
for example, roads enable the transport of raw materials to a factory, and also for the
distribution of finished products to markets

Three Types of Infrastructure in e-banking

• Building Infrastructure
• Systems Infrastructure
• Personnel Infrastructure

4.2 Building & System Infrastructure

Computer networking & Internet
The purpose of computer networking is sharing of computing resources and data across
the whole organization and the outside world. Computer Networks can be primarily
divided into two categories based on speed of data transfers and geographical reach. A 34

Local area network (LAN) connects many servers and workstations within a small
geographical area, such as a floor or a building. Some of the common LAN technologies
are 10 MB Ethernet, 100 MB Ethernet, 1GB Ethernet, Fiber Distributed
Data Interface (FDDI) and Asynchronous Transfer Mode (ATM). The data transfer rates
here are very high. They commonly use broadcast mode of data transfer. The Wide Area
Network (WAN), on the other hand, is designed to carry data over great distances and are
generally point-to-point. Connectivity in WAN set-up is provided by using dial-up
modems on the Public Switched Telephone Network (PSTN) or leased lines, VSAT
networks, an Integrated Services Digital Network (ISDN) or T1 lines, Frame Relay/X.25
(Permanent Virtual Circuits), Synchronous Optical Network (SONET), or by using
Virtual Private Networks (VPN) which are software-defined dedicated and customized
services used to carry traffic over the Internet. The different topologies, technologies and
data communication protocols have different implications
on safety and security of services.

To standardize on communications between systems, the International Organization of

Standards developed the OSI model (the Open System Interconnection Reference Model)
in 1977. The OSI breaks up the communication process into 7 layers and describe the
functions and interfaces of each layer. The important services provided by some of the
layers are mentioned below. It is necessary to have a good understanding of these layers
for developing applications and for deploying firewalls.

The data transmission protocol suite used for the Internet is known as the
Transmission Control Protocol/Internet Protocol (TCP/IP). The Internet is primarily a
network of networks. The networks in a particular geographical area are connected into a
large regional network. The regional networks are connected via a high speed “back
bone”. The data sent from one region to another is first transmitted to a Network Access
Point (NAP) and are then routed over the backbone. Each computer connected to the
Internet is given a unique IP address (such as and a hierarchical domain
name (such as Internet can be accessed using various application-
level protocols such as FTP (File Transfer Protocol), Telnet, (Remote Terminal Control
Protocol), Simple Mail Transport Protocol (SMTP), Hypertext Transfer Protocol (HTTP).
These protocols run on top of TCP/IP. The most innovative part of the Internet is the 35

World Wide Web (WWW). The web uses hyperlinks, which allow users to move from
any place on the web to any other place.
With the popularity of web, organizations find it beneficial to provide access to their
services through the Internet to its employees and the public. In a typical situation, a
component of the application runs (as an ‘applet’) within the browser on user’s
workstation. The applet connects to the application (directly using TCP/IP or through web
server using HTTP protocols) on the organization’s application and database servers.
These servers may be on different computer systems. The web-based applications provide
flexible access from anywhere using the familiar browsers that support graphics and
multimedia. The solutions are also scalable and easy to extend. Fig 4.1 below shows
some of the components and technologies/products commonly
used in the design of web-based applications.

Fig 4.1 Components of a web-based application

Banking Products:
E-Banking applications run on diverse platforms, operating systems and use different
architectures. The product may support centralized (bankwide) operations or branch level
automation. It may have a distributed, client server or three tier architecture based on a
file system or a DBMS package. Moreover, the product may run on computer systems of
various types ranging from PCs, open (Unix based) systems, to proprietary main frames.
These products allow different levels of access to the customers and different range of
facilities. The products accessible through Internet can be classified into three types based
on the levels of access granted: 36

1. Information only systems: General-purpose information like interest rates, branch

locations, product features, FAQs, loan and deposit calculators are provided on the bank’s
web (WWW) site. The sites also allow downloading of application forms. Interactivity is
limited to a simple form of ‘e-mail’. No identification or authentication of customers is
done and there is no interaction between the bank’s production system (where current
data of accounts are kept and transactions are processed) and the customer.

2. Electronic Information Transfer System: These systems provide customer specific

information in the form of account balances, transaction details, statement of account etc.
The information is still largely ‘read only’. Identification and authentication of customer
takes place using relatively simple techniques (like passwords). Information is fetched
from the Bank’s production system in either the batch mode or offline. Thus, the bank’s
main application system is not directly accessed.

3. Fully Transactional System: These systems provide bi-directional transaction

capabilities. The bank allows customers to submit transactions on its systems and these
directly update customer accounts. Therefore, security & control system need to be
strongest here.

Application architecture
A computer-based application may be built as a monolithic software, or may be structured
to run on a client–server environment, or even have three or multi-tiered architecture. A
computer application typically separates its 3 main tasks: interactions with the user,
processing of transactions as per the business rules, and the storage of business data. The
three tasks can be viewed as three layers, which may run on the same system (possibly a
large, proprietary computer system), or may be separated on to multiple computers
(across the Internet), leading to three-tier or multi-tier architecture.
These layers can be briefly described as follows:

4.2.1 Issues in administration of systems and applications:

The role of the network and the database administrator is pivotal in securing the
information systems of any organization. The role extends across various job functions
and any laxity in any of the functions leaves the system open for malicious purposes. A 37

few important functions of the administrator and how they relate to or impinge on system
security are discussed below:

a. Installation of software:
A software (whether system or application) needs to be carefully installed as per the
developer’s instructions. The software system may contain bugs and security holes, which
over a period are fixed through appropriate patches. It is necessary to know the latest and
correct configuration of all software packages.
Hackers and intruders are often aware of these bugs and may exploit known weaknesses
in the software; hence, care should be taken to install only the latest versions of software
with the latest patches. Further, improper installation may lead to degradation of services.
Installation of pirated software is not only illegal and unethical, but may also contain
trojans and viruses, which may compromise system security.
b. Access controls and user maintenance:
An administrator has to create user accounts on different computer systems, and give
various access permissions to the users. Setting access controls to files, objects and
devices reduces intentional and unintentional security breaches. A bank’s system policy
should specify access privileges and controls for the information stored on the computers.
The administrators create needed user groups and assign users to the appropriate groups.
The execution privilege of most system–related utilities should be limited to system
administrators so that users may be prevented from making system level changes. The
write / modify access permissions for all executables and binary files should be disabled.
c. Backup, recovery & business continuity:
Back-up of data, documentation and software is an important function of the
administrators. Both data and software should be backed up periodically. The frequency
of back up should depend on the recovery needs of the application. Online / real time
systems require frequent backups within a day. The back-up may be incremental or
complete. Automating the back up procedures is preferred to obviate operator errors and
missed back-ups. Recovery and business continuity measures, based on criticality of the
systems, should be in place and a documented plan with the organization and assignment
of responsibilities of the key decision making personnel should exist. An off-site back up
is necessary for recovery from major failures / disasters to ensure business continuity. 38

d. System & network logging :

Operating systems, database packages and even business applications produce a ‘log’ of
various tasks performed by them. Most operating systems keep a log of all user actions.
Log files are the primary record of suspicious behavior. Log files alert the administrator
to carry out further investigation in case of suspicious activity and help in determining the
extent of intrusion. Log files can also provide evidence in case of legal proceedings. The
administrator has to select types of information to be logged, the mechanisms for logging,
locations for logging, and locations where the log files are stored. The information
required to be logged should include Login/Logout information, location and time of
failed attempts, changes in status, status of any resource, changes in system status such as
shutdowns, initializations and restart; file accesses, change to file access control lists,
mail logs, modem logs, network access logs, web server logs, etc. The log files must be
protected and archived regularly and securely.

4.2.2 Security and Privacy Issues

1. Security: Security in e-banking comprises both the computer and communication
security. The aim of computer security is to preserve computing resources against abuse
and unauthorized use, and to protect data from accidental and deliberate damage,
disclosure and modification.
2. Authentication: It is a process of verifying claimed identity of an individual user,
machine, software component or any other entity. For example, an IP Address identifies a
computer system on the Internet, much like a phone number identifies a telephone. It may
be to ensure that unauthorized users do not enter, or for verifying the sources from where
the data are received.
3. Access Control: It is a mechanism to control the access to the system and its facilities
by a given user up to the extent necessary to perform his job function. It provides for the
protection of the system resources against unauthorized access. An access control
mechanism uses the authenticated identities of principals and the information about these
principals to determine and enforce access rights. It goes hand in hand with
authentication. In establishing a link between a bank’s internal network and the Internet,
we may create a number of additional access points into the internal operational system.
4. Data Confidentiality: The concept of providing for protection of data from
unauthorized disclosure is called data confidentiality. Due to the open nature of Internet, 39

unless otherwise protected, all data transfer can be monitored or read by others. Although
it is difficult to monitor a transmission at random, because of numerous paths available,
special programs such as “Sniffers”, set up at an opportune location like Web server, can
collect vital information. This may include credit card number, deposits, loans or
password etc.
5. Data Integrity: It ensures that information cannot be modified in unexpected way.
Loss of data integrity could result from human error, intentional tampering, or even
catastrophic events. Failure to protect the correctness of data may render data useless, or
worse, dangerous. Efforts must be made to ensure the accuracy and soundness of data at
all times. Access control, encryption and digital signatures are the methods to ensure data
6. Non-Repudiation: Non-Repudiation involves creating proof of the origin or delivery
of data to protect the sender against false denial by the recipient that data has been
received or to protect the recipient against false denial by the sender that the data has been
sent. To ensure that a transaction is enforceable, steps must be taken to prohibit parties
from disputing the validity of, or refusing to acknowledge, legitimate communication or
7. Security Audit Trail: A security audit refers to an independent review and examination
of system's records and activities, in order to test for adequacy of system controls. It
ensures compliance with established policy and operational procedures, to detect breaches
in security, and to recommend any indicated changes in the control, policy and
procedures. Audit Trail refers to data generated by the system, which facilitates a security
audit at a future date.

Attacks and Compromises:

When a bank’s system is connected to the Internet, an attack could originate at any time
from anywhere. Some acceptable level of security must be established before business on
the Internet can be reliably conducted. An attack could be any form like:
1. The intruder may gain unauthorized access and nothing more
2. The intruder gains access and destroys, corrupt or otherwise alters data
3. The intruder gains access and seizes control partly or wholly, perhaps denying
access to privileged users
4. The intruder does not gain access, but instead forges messages from your
system 40

5. The intruder does not gain access, but instead implements malicious procedures
that cause the network to fail, reboot, and hang.
Modern security techniques have made cracking very difficult but not impossible.
Further more, if the system is not configured properly or the updated patches are not
installed then hackers may crack the system using security hole. A wide range of
information regarding security hole and their fixes is freely available on the Internet.
Common cracking attacks include:
1. E-mail bomb and List linking
2. Denial-of-Service
3. Sniffer attack
4. Utilizing security hole in the system software

Authentication Techniques:
As mentioned earlier, authentication is a process to verify the claimed identity. There are
various techniques available for authentication. Password is the most extensively used
method. Most of the financial institutions use passwords along with PIN (Personal
Identification Number) for authentication. Technologies such as tokens, smart cards and
biometrics can be used to strengthen the security structure by requiring the user to possess
something physical.
1. Token technology relies on a separate physical device, which is retained by an
individual, to verify the user’s identity. The token resembles a small hand-held card or
calculator and is used to generate passwords. The device is usually synchronized with
security software in the host computer such as an internal clock or an identical time based
mathematical algorithm. Tokens are well suited for one-time password generation and
access control. A separate PIN is typically required to activate the token.
2. Smart cards resemble credit cards or other traditional magnetic stripe cards, but
contain an embedded computer chip. The chip includes a processor, operating system,
and both Read Only Memory (ROM) and Random Access Memory (RAM). They can be
used to generate one-time passwords when prompted by a host computer, or to carry
cryptographic keys. A smart card reader is required for their use.
3. Biometrics involves identification and verification of an individual based on
some physical characteristic, such as fingerprint analysis, hand geometry, or retina
scanning. This technology is advancing rapidly, and offers an alternative means to
authenticate a user. 41

The connection between internal networks and the outside world must be watched and
monitored carefully by a gatekeeper of sorts. Firewalls do this job. Otherwise, there is a
risk of exposing the internal network and systems, often leaving them vulnerable and
compromising the integrity and privacy of data. Firewalls are a component or set of
components that restrict access between a protected network and the outside world (i.e.,
the Internet). Broadly, there are three types of firewalls i.e. Packet filtering firewalls,
Proxy servers and stateful inspection firewall.
• Packet filtering routers:
Packet filtering routers are the simplest form of firewalls. They are connected between the
host computer of an Internal network and the Internet gateway as shown in Fig.6.
2. The bastion host directs message accepted by the router to the appropriate application
servers in the protected network. Their function is to route data of a network and to allow
only certain types of data into the network by checking the type of data and its source and
destination address. If the router determines that the data is sourced from an Internet
address which is not on its acceptable or trusted sources list, the connection would be
simply refused. Also, the filtering rules can be difficult to configure, and a poorly
configured firewall could result in security loopholes by unintentionally allowing access
to an internal network.

Fig. 2: A filtering router with a bastion host or proxy server

• Proxy servers:
Proxy servers control incoming and outgoing traffic for a network by executing specific
proxy program for each requested connection. If any computer outside the internal 42

network wants to access some application running on a computer inside the internal
network, then it would actually communicate with the proxy server, and proxy server in
turn will pass the request to the internal computer and get the response which will be
given to the recipient (outside user). That is, there is no direct connection between the
internal network and Internet. This approach allows a high level of control and in-depth
monitoring using logging and auditing tools.
a. Stateful Inspection firewall:
This type of firewalls thoroughly inspects all packets of information at the network level
as in the case of proxy servers. Specifications of each packet of data, such as the user and
the transportation method, the application used are all queried and verified in the
inspection process. The information collected is maintained so that all future are
inspected and compared to past transmission. If both the “state” of the transmission and
the “context” in which it is used deviate from normal patterns, the connection would be
refused. These types of firewalls are very powerful but performance would also decline
due to the intensive inspection and verification performed.

Fig.6.3: Creating a ‘Militarized Zone” to protect internal systems

The process of disguising a message in such a way as to hide its substance is called
encryption. An encrypted message is called cipher text. The process of turning a cipher
text back into plain text is called decryption. Cryptography is the art and science of
keeping messages secure. It uses a ‘key’ for encrypting or decrypting a message. Both the
method of encryption and the size of key are important to ensure confidentiality of a 43

message. There are two types of encryption: Symmetric key and Asymmetric key
encryption. In the symmetric key cryptography scheme, the same key is used to encrypt
and decrypt the message. Common symmetric algorithms include One-time pad
encryption, Data Encryption Standard (DES), Triple DES, LOKI, Twofish, Blowfish,
International Data Encryption Algorithm (IDEA). DES and Triple DES are the commonly
used techniques. Asymmetric key cryptography scheme is also known as Public key
crypto-system. Here two keys are used. One key is kept secret and therefore it is referred
as “private key”. The other key is made widely available to anyone who wants it, and is
referred as “Public key”. The Public key and Private key are mathematically related so
that information encrypted using the public key can only be decrypted by the
corresponding private key and vice-versa.
• Diffie-Hellman: This is the first public key algorithm invented. It gets its security from
the difficulty of calculating discrete logarithms in a finite field. Diffie-Hellman method
can be used for distribution of keys to be used for symmetric encryption.
• RSA: Named after its three inventors, Ron Rivest, Adi Shamir and Leonard Adleman,
who first introduced the algorithm in 1978, RSA gets its security from the difficulty of
factoring large numbers. The public and private keys are function of a pair of large (100
or 200 digits or even larger) prime numbers. The pair is used for asymmetric encryption.

Digital Signature and certification:

Digital signatures authenticate the identity of a sender, through the private, cryptographic
key. In addition, every digital signature is different because it is derived from the content
of the message itself. The combination of identity authentication and singularly unique
signatures results in a transmission that can not be repudiated.
Digital signature can be applied to any data transmission, including e-mail. To generate
digital signature, the original, unencrypted message is processed through mathematical
algorithms that generate a ‘message digest’ (a unique character representation of data).
This process is known as “hashing”. The message digest is then encrypted with the
private key and sent along with the message (could be encrypted also). The recipient
receives both the message and encrypted message digest. The recipient decrypts the
message digest using the sender’s public key, and then runs the message through the hash
function again. 44

Certification Authorities and Digital Certificates:

Certificate Authorities and Digital Certificates are emerging to further address the issues
of authentication, non-repudiation, data privacy and cryptographic key management. A
Certificate Authority (CA) is a trusted third party that verifies the identity of a party to a
transaction. To do this, the CA vouches for the identity of a party by attaching the CA’s
digital signature to any messages, public keys, etc., which are transmitted. The CA must
be trusted by the parties involved, and identities must have been proven to the CA
beforehand. Digital certificates are messages that are signed with the CA’s private key.
They identify the CA, the represented party, and even include the represented party’s
public key.

Fig.6.4: Flow of messages in SSL-based security (at conceptual level)

Secure Socket Layer (SSL):

SSL is designed to make use of TCP to provide a reliable end-to-end secure service. The
SSL servers have digital certificates issued by Certifying Authorities so that the clients
can authenticate the service provider (a bank in our case). The servers use a password 45

/PIN/digital certificate to authenticate clients. Once the clients and server have
authenticated each other, they establish a session key for encryption of messages. The
diagram above shows flow of messages in SSL. The flow of authentication messages in
SSL is shown in Fig.6.4.

Public Key Infrastructure (PKI):

Public key cryptography can play an important role in providing needed security services
including confidentiality, authentication, digital signatures and integrity. Public key
cryptography uses two electronic keys: a public key and a private key. The public key can
be known by anyone while the private key is kept secret by its owner. As long as there is
strong binding between the owner and the owner’s public key, the identity of the
originator of a message can be traced to the owner of the private key. A Public Key
Infrastructure (PKI) provides the means to bind public keys to their owners and helps in
the distribution of reliable public keys in large heterogeneous networks.

Physical Security:
Physical security is a vital part of any security plan and is fundamental to all security
efforts--without it, information security, software security, user access security, and
network security are considerably more difficult, if not impossible, to initiate. Physical
security is achieved predominantly by controlled and restricted physical access to the
systems resources. Access control broadly provides the ability to grant selective access to
certain people at certain times and deny access to all others at all times. Physical security
involves the protection of building sites and equipment (and all information and software
contained therein) from theft, vandalism, natural disaster, manmade catastrophes and
accidental damage (e.g., from electrical surges, extreme temperatures and spilled coffee).

Security Policy:
The information security policy is the systemization of approaches and policies related to
the formulation of information security measures to be employed within the organization
to assure security of information and information systems owned by it.
The security policy should address the following items:
1. Basic approach to information security measures.
2. The information and information systems that must be protected, and the reasons for
such protection. 46

3. Priorities of information and information systems that must be protected.

4. Involvement and responsibility of management and establishment of an information
security coordination division.
5. Checks by legal department and compliance with laws / regulations.
6. The use of outside consultants.
7. Identification of information security risks and their management.
8. Impact of security policies on quality of service to the customers (for example,
disabling an account after three unsuccessful logins may result in denial of service when
it is done by somebody else mischievously or when restoration takes unduly long time).
9. Decision making process of carrying out information security measures.
10. Procedures for revising information security measures.
11. Responsibilities of each officer and employee and the rules (disciplinary action etc) to
be applied in each case.
12. Auditing of the compliance to the security policy.
13. User awareness and training regarding information security.
14. Business continuity Plans.
15. Procedures for periodic review of the policy and security measures.

The top management of the bank must express a commitment to security by manifestly
approving and supporting formal security awareness and training. This may require
special management level training. Security awareness will teach people not to disclose
sensitive information such as password file names. Security guidelines, policies and
procedures affect the entire organization and as such, should have the support and
suggestions of end users, executive management, security administration, IS personnel
and legal counsel.

4.3 Personnel infrastructure

Successful application of e-banking demands not only availability of technology and
infrastructural facilities but also a skilled manpower that can appreciate and apply it.
Bangladesh lacks skilled manpower and knowledgeable managers in the IT sector.
Computers are primarily used for word processing, making presentations, e-mails in
selected formal sector business establishments. However, the communication is
constrained by the quality of verbal and written communication skills in English, which is
mediocre at best, even among university graduates. If Bangladesh aims to interact closely 47

with the international markets and seeks growth through exports, improved
communication and computer skills among various segments of the society are

A good understanding of the current benefits and future opportunities of e-banking is

essential for the advancement of e-banking. The lack of knowledge among public
officials about the Internet and its potential, and their application in e-commerce,
significantly handicaps policy reforms in this sector. In the private sector, viable IT
sector projects fail to obtain financing due to the lack of understanding of the investors.

Simply put, all recommendations for e- banking, e-Policy, e-Governance and e-

Commerce – the very ability of a population, country, or society to join the technology
revolution and the resulting global economy – hinge on the presence of an IT savvy
population and highly skilled workforce. Looking at e-HRD - the creation of said
“workforce” - we can break the discussion into three separate but related ideas:
• Awareness - a level of knowledge and understanding as necessary for those in the
position to make policy and set the course of government involvement
• User - a basic, practical level of knowledge of ICT necessary for those utilizing
technologies such as email, internet, word processing, spreadsheets, Power Point, etc. in
government, the private sector, and academia – across all sectors
• Professional - a level of knowledge for those designing, building and maintaining the
complex structures of interrelated hardware, software and connectivity that are the
backbone of the global information economy
All are necessary to support the growth of a domestic market as well as make inroads into
the international market.. Various studies state divergent figures for the “trained”
population, as previously mentioned, a span of 5,000 to 30,000 depending on the source.
Regardless of the actual number, with a close look at this population of “trained”
graduates relative to the three areas presented above we can discern the challenges,
opportunities and benefits at each level as well as identify the key players important to
any improvement.
After incorporating our experience to date, JOBS has arrived at the singular conclusion
that all paths to effective and sustainable ICT-led development lead first to e-HRD.
HRD cannot be limited to the upper reaches of professional skill, but must also be broad-
based and incorporate awareness and user basics. At the higher levels of training a focus 48

on networking and operating systems allows for the advantages of the “flattening” of the
world as discussed in the Thomas Friedman article. The Global Information Technology
Report 2004- 2005 provides evidence of the dire state in which Bangladesh currently
finds itself in this regard.

Requirements for infrastructure development

Security Organization: Organizations should make explicit security plan and document
it. There should be a separate Security Officer / Group dealing exclusively with
information systems security. The Information Technology Division will actually
implement the computer systems while the Computer Security Officer will deal with its
security. The Information Systems Auditor will audit the information systems.
Access Control: Logical access controls should be implemented on data, systems,
application software, utilities, telecommunication lines, libraries, system software, etc.
Logical access control techniques may include user-ids, passwords, smart cards or other
biometric technologies.

Firewalls: At the minimum, banks should use the proxy server type of firewall so that
there is no direct connection between the Internet and the bank’s system. It facilitates a
high level of control and in-depth monitoring using logging and auditing tools.

Isolation of Dial Up Services: All the systems supporting dial up services through
modem on the same LAN as the application server should be isolated to prevent
intrusions into the network as this may bypass the proxy server.

Security Infrastructure: At present, PKI is the most favored technology for secure e-
banking services. However, it is not yet commonly available. While PKI infrastructure is
strongly recommended, during the transition period, until IDRBT or
Government puts in the PKI infrastructure, the following options are recommended
1. Usage of SSL, which ensures server authentication and the use of client side
certificates issued by the banks themselves using a Certificate Server.
2. The use of at least 128-bit SSL for securing browser to web server
communications and, in addition, encryption of sensitive data like passwords in transit
within the enterprise itself. 49

Isolation of Application Servers: It is also recommended that all unnecessary services on

the application server such as ftp, telnet should be disabled. The application server should
be isolated from the e-mail server.
Security Log (audit Trail): All computer accesses, including messages received, should
be logged. All computer access and security violations (suspected or attempted) should be
reported and follow up action taken as the organization’s escalation policy.

Penetration Testing: The information security officer and the information system auditor
should undertake periodic penetration tests of the system, which should include:
1. Attempting to guess passwords using password-cracking tools.
2. Search for back door traps in the programs.
3. Attempt to overload the system using DdoS (Distributed Denial of Service) & DoS
(Denial of Service) attacks.
4. Check if commonly known holes in the software, especially the browser and the email
software exist.
5. The penetration testing may also be carried out by engaging outside experts (often
called ‘Ethical Hackers’).

Physical Access Controls: Though generally overlooked, physical access controls should
be strictly enforced. The physical security should cover all the information systems and
sites where they are housed both against internal and external threats.

Back up & Recovery: The bank should have a proper infrastructure and schedules for
backing up data. The backed-up data should be periodically tested to ensure recovery
without loss of transactions in a time frame as given out in the bank’s security policy.
Business continuity should be ensured by having disaster recovery sites where backed up
data is stored. These facilities should also be tested periodically.

Monitoring against threats: The banks should acquire tools for monitoring systems and
the networks against intrusions and attacks. These tools should be used regularly to avoid
security breaches.

Education & Review: The banks should review their security infrastructure and security
policies regularly and optimize them in the light of their own experiences and changing 50

technologies. They should educate on a continuous basis their security personnel and also
the end-users.

Log of Messages: The banking applications run by the bank should have proper record
keeping facilities for legal purposes. It may be necessary to keep all received and sent
messages both in encrypted and decrypted form. (When stored in encrypted form, it
should be possible to decrypt the information for legal purpose by obtaining keys with
owners’ consent.)

Certified Products: The banks should use only those security solutions/products which
are properly certified for security and for record keeping by independent agencies (such
as IDRBT).

Maintenance of Infrastructure: Security infrastructure should be properly tested before

using the systems and applications for normal operations. The bank should upgrade the
systems by installing patches released by developers to remove bugs and loopholes, and
upgrade to newer versions which give better security and control.

Approval for I-banking: All banks having operations in India and intending to offer
Internet banking services to public must obtain an approval for the same from RBI. The
application for approval should clearly cover the systems and products that the bank plans
to use as well as the security plans and infrastructure. RBI may call for various documents
pertaining to security, reliability, availability, auditability, recoverability, and other
important aspects of the services. RBI may provide model documents for Security Policy,
Security Architecture, and Operations Manual.

Standing Committee: RBI may set up a standing Committee to monitor security policy
issues and technologies, to review prescribed standards, and to make fresh
recommendations on a regular basis.
Well Trained Personnel 51

E-Banking in Southeast Bank 52

5.1 About southeast bank

5.1.1 Vision
To be a premier banking institution in Bangladesh and contribute significantly to the
national economy.

5.1.2 Mission
 High quality financial services with the help of the latest technology.
 Fast and accurate customer service.
 Balanced growth strategy.
 Follow ethical standards in business.
 Steady return on shareholders' equity.
 Innovative banking at a competitive price.
 Attract and retain quality human resource.
 Commitment to Corporate Social Responsibility

5.1.3 Core Values

 Integrity
 Fairness
 Harmony
 Courtesy
 Commitment
 Insight and Spirit
 Enthusiasm for Work
 Business Ethics
 Respect
 Team Spirit
 Service Excellence

5.1.4 Core Competencies

 Transparent and swift decision making 53

 Professional team of performers

 Satisfied clients
 Internal control
 Experienced risk administration
 Diversification

5.1.5 Five years performance at a glance

Particulars 2009 2008 2007 2006 2005

Authorized Capital 10,000.00 3,500.00 3,500.00 3,500.00 2,500.00

Paid up Capital 3,422.64 2,852.20 2,281.76 2,112.74 1,056.37

Reserve Fund / Others 6,504.62 4,804.81 4,186.60 2,828.18 1,180.47

Deposit 96,669.05 68,714.67 55,474.05 46,056.18 38,258.15

Advance 77,497.57 60,281.26 48,164.60 41,147.28 32,551.09

Investment 21,350.23 12,299.61 8,462.86 6,265.55 5,113.14

Import Business 69,582.92 58,019.77 38,470.34 35,125.12 29,079.30

Export Business 46,724.47 42,178.60 28,771.36 25,874.61 13,511.10

Guarantee Business 11,916.74 15,078.99 9,008.32 8,656.80 7,975.00

Remittance Business 23,800.00 15,221.87 11,040.17 13,479.83 3,507.40

Total Income 13,702.25 10,250.13 8,670.47 6,766.11 4,689.55

Total Expenditure 9,087.79 7,237.55 5,754.27 4,703.45 3,216.11

Operating Profit 4,614.66 3,012.58 2,916.20 2,062.66 1,473.44

Net Profit after Tax

1,870.19 887.24 1,222.97 909.88 374.20
and Provision

Fixed Assets 4,338.35 2,685.56 1,708.11 1,300.39 790.62

Total Assets 112,676.98 81,181.53 64,370.69 53,706.12 43,294.81 54

5.2 E-banking services in Southeast Bank

5.2.1 Dual Currency VISA Credit Card

Features and Benefits

 Single Card-Dual Use (Local & International):
SEBL Visa (Dual) Credit Card has unique feature of allowing limits both for local and
international usage in a single card. However, one may opt for separate cards if he / she
finds the same convenient for him / her. SEBL Visa (Dual) Credit Card is accepted at any
merchant locations or payment counters displaying Visa logo in any part of the world.

 Widely Accepted at Merchants & ATMs Worldwide

 Competitive Annual / Renewal Fee
 20 - 50 Days Interest Free Credit Facility:
SEBL Visa Credit Card allows free credit facility on purchase up to minimum 20 days
and maximum 50 days without any interest if there is no outstanding amount on the card
account in the previous month's bill.
 50% Cash Drawing Facility at ATMs and any Southeast Bank Branch:
SEBL Credit Cardholder can draw cash up to 50% of the credit limit against his / her
card. Cash may be drawn from all ATMs or payment counters having Visa logo. Cash
withdrawal facility is also available from any of our branches across the country. No
interest free grace period is available for any cash advance.
 100% Cash Drawing Facility at purchase mode through Card Cheque:
Cardholders can issue Account Payee Card Cheque against local limit. Transaction mode
of Card Cheque will be treated as Purchase
 Easy Repayment:
Cardholder has also the option of paying a minimum of 5% of his / her bill amount every
month and thus can enjoy the flexibility to plan repayment in installment basis.
 Auto Payment facility:
If a cardholder maintains an account with any of the SEBL branches, he / she can instruct
us to realize the monthly bill against his / her credit card from his / her SB/CD/STD
account automatically. 55

 Payment of International Roaming Bill of Mobile Phone:

Cardholder can pay his / her international roaming bill of cell phone through Credit Card.
 Auto Debit Facility of Mobile Phone Post Paid Subscribers
 Free Supplementary Cards:
Supplementary cards are issued against a Principal Card. While each supplementary
cardholder will have his / her own independent usage within the principal card - holder's
credit limit, the expenses will be charged to the principal card - holder's account. Separate
limit but not exceeding the principal may be fixed for each supplementary card.
 SMS Push - Pull Service:
Cardholder can enquire about his / her credit card status through his / her cell phone.
• Push services:
1. Transaction alert
2. Bill status
• Pull services:
1. Balance enquiry
2. Statement status
3. Minimum due status
4. Last transaction enquiry
• 24 hours Customer Service.
Rate of Interest
Any amount that remains outstanding after the payment due date will attract an interest @
2.50% per month calculated on daily basis from the date of transaction until the entire
amount is paid in full.

In case of cash advance, the interest @ 2.50% per month will be charged and calculated
on daily basis from the date of transaction until cash advance is paid in full.

Fees & Charges

Southeast Bank VISA Credit Cards Gold Card Classic Card

01. Principal Card Annual / Renewal Fee:

Local Tk. 1200.00 600.00
International / Dual USD. 60.00 30.00
02. Supplementary Card Annual Fee / Renewal Fee : 56

Local Tk. Free Free

03. Replacement Card Fee :
Local Tk. 300.00 300.00
International / Dual USD. 10.00 10.00
04. Late Payment Fee :
Local Tk. 350.00 200.00
International / Dual USD. 10.00 10.00
05. Return Cheque Fee :
Local Tk. 350.00 250.00
International / Dual USD. 10.00 10.00
06. Statement Retrieval Fee:
Local Tk. 50.00 50.00
International / Dual USD. 5.00 5.00
07. Charge Slip Retrieval Fee :
Local Tk. 250.00 200.00
International / Dual USD. 10.00 10.00
08. Outstation Cheque Collection Fee :
Local Tk. 100.00 100.00
International / Dual USD. 15.00 15.00
09. Personal Identification Number (PIN) Re - issuance Fee :
Local Tk. 500.00 500.00
International / Dual USD. 10.00 10.00
10. Excess Limit Charge :
Local Tk. Nil Nil
International / Dual USD. Nil Nil
11. Cash Withdrawal Fee:
2% of advance fee or Tk. 100
Local Tk.
which is higher
2% of advance fee or $ 3
International / Dual USD.
which is higher
12. Cheque Honor Fee:
Local Tk. 1% of the drawn amount
International / Dual USD. N/A N/A
13. Cheque Book Issue Fee:
Tk. 15 per leaf

5.2.2 Remittance Business

Our over six million expatriates are a source of pride for Bangladesh. They represent us
abroad by building our image. They also spread the richness of our cultures across the
globe. In that sense, they are the ambassadors of goodwill for Bangladesh. Their 57

contribution is equally important, if not more, in the contribution they make to the
economy of the country. The foreign exchange they send home is the second largest
source of much needed foreign exchange for our economic development. In fact if we
adjust import costs against export of the garments sector that overtly brings more foreign
exchange to the national economy, remittance will figure as the single largest source of
foreign exchange for Bangladesh. Nationalized and private banks are the principal agents
for bringing remittance to the country.

Although Southeast Bank has entered into remittance late compared to the other private
banks, it has continuously strived to build its remittance business around quality service
by making it easy for remitters to remit money through a network of agreements with
reputed banks and remittance houses abroad and an extensive network in the country to
deliver the money to the beneficiaries at their door in the quickest possible time and
without hassles.
SEBL deliverer money to the beneficiaries without service charges & assures
confidentiality in transactions. Additional features of SEBL‘s one - stop remittance
delivery service are:

• • Use of mobile and SMS to contact the beneficiary.

• • Home delivery of remittance business where necessary and possible.
• • Initiate Remittance Card Service for use in ATM booths.
• • Register data for later use for instant cash payment over the counters.
• • On line account credit to those who have accounts with branches of
Southeast Bank.
• • Account credit services using on line facilities of other banks.
• • EFF/TT services.
• • Mail transfer (MT).
• • Assist in opening Wage Earner Accounts.
• • Assist in opening accounts under different types of savings schemes.
• • Provide anti money laundering advice.

Global Partners
Western Union Money Transfer Services (

UK (United Kingdom) based Money Transfer Companies:

• AN Express Limited 58

• Rumana Money Services UK

• K.F. Money Transfer UK (
• K.M.B Money Transfer UK
• Eastern Money Transfer UK Limited (
• Khan Money Transfer UK
• Bangladesh Money Transfer UK Limited
• First Solution Money Transfer UK Limited (

UAE (United Arab Emirates) based Money Transfer Companies:

• Al Ahalia Money Exchange Bureau (
• Al Fardan Exchange
• Wall Street Exchange Centre LLC (
• Al Ansari Exchange (
• Xpress Money Services Limited (
• Habib Exchange Co.LLC (
• Lulu Exchange Co.LLC (
• Smart Exchange (

Sultanate of Oman based Money Transfer Companies:

• Oman & UAE Exchange Center & Company
• Asia Express Exchange (

Bahrain based Money Transfer Company:

• BexMoney Bahrain Exchange Company (

USA (United States of America) based Money Transfer Companies:

• Neno Money Transfer
• Wall Street Finance LLC
• Trans - Fast Remittance LLC (
• Royal Exchange ( 59

• Continental Exchange Solution (Ria Financial Services). (Though incorporated

in the USA, Ria is a global player as we receive Remittances through RIA from
USA, Canada, UAE, UK, France, Italy, Sweden, Cyprus, Australia and other
major destinations). (

Canada based Money Transfer Company:

• Megna Exchange

K.S.A (Kingdom of Saudi Arabia) based Banking Partners:

• Al Rajhi Banking Corporation (
• National Commercial Bank (
• Bank Al Bilad (

Italy based Money Transfer Company:

• National Exchange srl (

5.2.3 Western Union Money Transfer Services

Western Union, a global leader in money transfer service, helps to send money to loved
ones quickly and reliably with convenience and control through more than 245,000
Western Union Agent locations in over 200 countries and territories. Western Union
money transfer service is ideal for transferring money virtually at any time, anywhere,
providing a high level of security, flexibility and reach with the fastest, easiest money
transfer solutions.
With the signing of the Representation Agreement between Western Union Financial
Services, Inc., U.S.A. and Southeast Bank Ltd., Bangladeshi Wage Earners abroad can
now send their hard - earned money through Western Union and their families and friends
can receive the money in minutes by visiting any of the 56 branches and 10 SME
locations of Southeast Bank Ltd. all over Bangladesh. The Beneficiary does not have to
pay any fee to receive the money transfer.
With Western Union and Southeast Bank Ltd., money transfer has never been so easy; it
is a 3 step process: 60

I. The sender will receive money receipt with Money Transfer Control Number
(MTCN) from any of the Western Union agent location outside Bangladesh after
depositing money.
II. The sender will inform the money transfer detail (amount of money sent, sender's
name, receiver's name, destination country, and MTCN) to the receiver.
III. The receiver will receive the money from any of the 66 Branches of Southeast
Bank Ltd. by showing a valid Identification and filling a form.
Money transfers can be received from 9.00 A.M. to 3.00 PM on Sunday through
Thursday and from 9.00 A.M. to 12.00 PM on Saturday in 17 Authorized Dealer

5.2.4 SWIFT Services

The Society for Worldwide Inter Bank Financial Telecommunication ("SWIFT") operates
a worldwide financial messaging network. Messages are securely and reliably exchanged
between banks and other financial institutions. Southeast Bank Limited has SWIFT
services. The Bank's SWIFT address is SEBD BD DH.

5.2.5 SMS Banking

Pull Services:
• Account Balance Inquiry
• Last 3 Transactions
• Cheque Leaf Status
• Interest Rate for different deposit products
• Foreign Currency Exchange Rate
• Branch Location / Telephone No.
• ATM Booth Location
• SMS Registration information
• Help list of Keywords to send SMS
• Help message format to send SMS
Request Services:
• Fund Transfer
• Mobile Bill Payment
• Cheque Book Request 61

• Account Statement Print Request

• Account Statement Request by Courier
• Account Statement Request by E – mail
Execution Services:
• Stop Payment
• Stopped Cheque Leaf Reactivation
• PIN Change
• Debit Alert
• Clearing Cheque Return Alert
• Loan / Time / Scheme Deposit Maturity Alert
• Registration form must be completed and submitted to the branch, where the
account(s) is / are maintained.
• For any change in registration, account holder(s) has to complete a Registration
Amendment Form.
Users' Responsibilities:
• The account holder(s) is solely responsible for any misuse of SMS Banking
• The client(s) is solely responsible for maintaining the confidentiality of his / her
financial information by ensuring safe holding of the PIN and mobile phone
assigned for the SEBL SMS Banking Service. If the mobile phone is lost, stolen,
exchanged with another individual or the PIN is disclosed, the account holder
shall immediately notify the Branch or Head Office (Tel: 02-9571050) to stop the
service temporarily. Otherwise, all SMS received from lost mobile phone will be
treated as client's authorized message. Client has to inform the changed mobile
number (if any) in writing by filling up the amendment form.
• The account holder(s) hereby agrees that Southeast Bank Ltd. shall not be
responsible for any disruption in SMS Banking Service due to mobile phone
service provider or any mechanical / electrical failure on the part of Southeast
Bank Ltd. 62

• Stop Payment and Cheque Leaf Reactivation for Payment services will be
available during office hour only. Account Statement Request is limited for
previous 6 (six) months only.
• Reply SMS charges are monthly payable with 15% VAT. If account holder does
not pay due SMS charges for consecutive 3 (three) months, SMS service will be

Fees & Charges:

Service Execution Charge per

Service Name Other Charges
Code Charge Reply SMS

Pull Services - 3.00 -

201 Fund Transfer 50.00 3.00 -

202 Mobile Bill Payment 25.00 3.00 -

203 Cheque Book Request - 3.00 Charge for cheque book

Account Statement Print

204 - 3.00 5.00/ page

Account Statement 5.00/page + courier

205 - 3.00
Request by Courier charge

Account Statement
206 25.00 3.00 -
Request by E - mail

Execution Services - 3.00 -

Alert Services - 3.00 -

5.2.6 ATM Services

Southeast Bank Limited is a member of the E-cash Shared ATM Network. E-Cash has a
network of 32 ATM's located in strategically important locations on five important cities /
towns of the country namely: Dhaka, Chittagong, Sylhet, Cox's Bazar and Rajshahi. We
are providing ATM service coverage to our 30 branches.

We are issuing ATM card against SB, CD & STD Account
Fees & Charges
TK 500 for annual / renewal fee. 63

5.2.7 Export
Southeast Bank Limited offers a wide range of export services. Routing all export related
transactions through Southeast Bank Limited could eliminate many of exporting hassles.
With our expertise and experience, we can structure and customize solutions for specific

Features and Benefits

 Export LC Advising:
Southeast Bank Limited allows prompt advising of export letter of credit from a wide
international network.
 Export Packing Credit:
We provide pre - shipment finance in the form of Export Packing Credit (PC) to assist
cash flows for manufacturing or packing goods for export from Bangladesh. Export
finance requirements are carefully taken by the Bank and allowing to enjoy competitive
interest rates and timely credit.

 Export Bill Negotiation:

We negotiate export bills drawn under Letter of Credit, if the documents are found to be
strictly in terms with LC conditions. Southeast Bank Limited facilitates its customers with
DOCUMENTARY BILL FOR COLLECTION (FDBC) for export bill negotiation. All
these facilities come to at competitive rates and world class service standards
Provide confirmation (If LC issuing Bank is not well known) to the exporter.
Retention quota facility for the exporter.
Provide complete documentation, lower cost, faster processing
Export LC transfer facility (full or partial) is available with competitive fee.
Bank Guarantee facility is available.

Fees & Charges

 Negotiation commission for export bills in foreign currency:
No charges for Negotiation. Interest on overdue period will be applied as per our
lending rate.
 Negotiation commission for export bills in local currency: 64

• @0.25% flat or minimum Taka 1,000/- plus interest for the period the
bill remain outstanding.
• Advising Foreign Bank LCs to the local beneficiary @ Taka 1,000/- per instance
 LC advising charge - Local LC ( BTB & Inland):
• Taka 750/- per instance for our Bank client.
• Taka 1,000/- per instance for other bank's clients
 Transfer of LC:
• Transfer Charge - Taka 1,000/- per instance for our Bank's client.
• Commission for transfer of amendment - Taka 500/- per instance for our Bank's
• Adding confirmation charge @ 0.25% per quarter
• Foreign Bank's guarantee commission against discrepant bills At actual
• Collecting Bank's charges from abroad At actual
 Processing of documents under collection in local currency:
• Full waiver of handling charges.
• Postage / Swift / Mail / Telex / Courier charges to be realized at actual.
 Mailing of Export Document:
• 1st mail at actual or minimum Taka 1,500/-
• 2nd mail at actual or minimum Taka 800/-
• Advising of guarantee to the beneficiary in original without any engagement on
our part @ Taka 500/- flat.
• Advising of Guarantee in original by adding our confirmation. As per agency
agreement or @ 0.50% per quarter or part thereof minimum Taka 1,000/-.
• Advising of guarantee in our own format or on the format supplied by the opening
bank with our full engagement - As per agency agreement or @ 0.50% per quarter
or part thereof minimum Taka 1,000/-.
• Issuing Bid Bond / Performance Bond favoring overseas beneficiary through
foreign correspondent at client�s request - As per agency agreement or @
0.25% per quarter or part thereof along with SWIFT / Mail charge.
• Charge for issuance of Export Performance Certificate @ Taka 200/- and
stationary charge Taka 50/-. 65

 Charge for issuance of Proceeds Realization Certificate (PRC) / PRC for

Cash Incentive / Custom Purpose:
• Taka 500/- per instance
• Taka 200/- specially for Jute Sector
• Charge for issuance of Back to Back LC Certificate - Taka 500/- per instance.
• EXP issuing charge - Taka 200/- per instance.
• Charge for issuance of C&F Certificate - Taka 500/- per instance.

5.2.8 Import
Features and Benefits
 Import Services:
Southeast Bank Limited offers comprehensive range of Import services. Southeast Bank
Limited is highly respected in the world of international finance and cross border
transactions. Through our expertise and experience, we can structure and customize
solutions suited to specific business requirements.
 Import Letters of Credit:
We issue Import Letters of Credit on behalf of our customers. Our experts can advise in
drafting the LC terms and conditions so as to protect customers' interests.
 Import Collection Bill Services:
Documentary Collections are a common and flexible method of payment for goods
purchased from suppliers in abroad. Rely on our expertise in efficient and prompt
handling of Import collection documents.
• Supply advance payments towards Imports.
• Shipping Guarantee & Bank Guarantee are also available.
• Post shipment finance such as LIM, LTR etc for your immediate liquidity.
• Back to Bank L/C facility against Export LC.

Fees & Charges

 LC Opening Commission under cash:
• 1st Quarter: Maximum 0.50% - Minimum 0.25%
• Each subsequent quarter or part thereof: Maximum 0.30% - Minimum 0.15%
 LC Opening Commission under AID / Loan Credit / Barter:
• 1st Quarter: Maximum 0.50% - Minimum 0.25% 66

• Each subsequent quarter or part thereof: Maximum 0.30% - Minimum 0.15%

 LC Opening Commission for Back to Back LC on account of export oriented
garments or specialized textile industries:
• 1st Quarter: Maximum 0.50% - Minimum 0.25%
• Each subsequent quarter or part thereof: Maximum 0.30% - Minimum 0.15%
 LC Opening Commission for Back to Back LC other than export oriented
garments or specialized textile industries:
• 1st Quarter: Maximum 0.50% - Minimum 0.25%
• Each subsequent quarter or part thereof: Maximum 0.30% - Minimum 0.15%
 LC Opening Commission where 100% margin is received:
• 1st Quarter: Maximum 0.25% - Minimum 0.20%
• Each subsequent quarter or part thereof: Maximum 0.25% - Minimum 0.15%

 LC Opening Commission under deferred payment:

• 1st Quarter: @ 0.60%
• Each subsequent quarter or part thereof: @ 0.40%

 Acceptance commission under deferred payment LC:

• 1st Quarter: Maximum 0.40% - Minimum 0.25%
• Each subsequent quarter or part thereof: Maximum 0.25% - Minimum 0.15%
• Charge for LC transmission by mail (Charge will cover cost of registered mail of
LC to the Advising Bank and copy to the Reimbursement Bank) – At actual
• Charge for LC transmission by Telex / SWIFT – At actual
• Charge for amendment LC transmission by mail – At actual
• Charge for amendment LC transmission by Telex / SWIFT – At actual

 Charge for our arranging confirmation from a Third Bank:

• For Sight LC on Opener's Account – 0.25% along with foreign correspondent's
actual commission and charges of mailing / courier / telex / SWIFT at actual.
• For DP LC up to 180 days on Opener's Account - 0.25% along with foreign
correspondent's actual commission and charges of mailing / courier / telex /
SWIFT at actual. 67

• For Sight LC on Beneficiary Account - 0.25% along with foreign correspondent’s

actual commission and charges of mailing / courier / telex / SWIFT at actual.
• For DP LC up to 180 days on Beneficiary Account - 0.25% along with foreign
correspondent's actual commission and charges of mailing / courier / telex /
SWIFT at actual.
• Foreign correspondent charge for all types of LC – At actual as per the schedule
of charges of foreign correspondent.
 Handling charges for all types of LC:
• For Foreign LC – Taka 1,000/- per LC
• For Local LC – Taka 500/- per LC
• Foreign correspondent charge for amendment LC – At actual or minimum $15 as
per the schedule of charges of foreign correspondent.
• Handling charges for amendment of LC (except local LC) – Taka 500/- per LC
 LC cancellation charges:
• By Telex / SWIFT – Full waiver
• By Air Mail – Full waiver
• Mailing / Courier / Telex / SWIFT charge – At actual
• Charge for collection of Credit Report on the Beneficiary of the LC by Telex /
SWIFT – At actual along with service charge (Minimum Taka 750/-)
• IRC Renewal Fee – Govt. fee at actual along with service charge of Taka 300/-.
• Indemnity for shipping guarantee (or NOC Issued) in absence of original
documents - Taka 750/- (Flat).
• Endorsement of copy documents for assessment of goods / consignment against
all types of LC – Full waiver.
• Application set for any type of foreign LC – Taka 200/- along with cost of stamp.
• PSI handling charge – Taka 200/-
• SWIFT charge against acceptance (Foreign) – Taka 500/-
• Postage charge against acceptance (Local) – Taka 100/-
 Payment against collection of documents (Import without LC):
• $15 for collection of documents valued $5000
• $30 for collection of documents valued above $5000
 SWIFT and other charges against Payment Instruction (Cash LC): 68

• $15 for the value of $5000

• $30 for the value of above $5000
 SWIFT and other charges against Payment Instruction (Back to Back LC):
• $15 for the value of $5000
• $30 for the value of above $5000

5.3 Foreign Correspondents of Southeast Bank

SI. No. Currency Correspondents City Account No.

1. USD Standard Chartered Bank New York 3582-088281-001

2. USD Habib American Bank New York 20729474

3. USD JPMorgan Chase Bank N.A. New York 811165059

4. USD HSBC Bank New York 000-05176-4

5. USD Citi Bank NA. New York 36143302

6. USD Wachovia Bank N.A. New York 2000193002832

7. USD Mashreqbank psc New York 70120852

8. EUR Citibank AG Frankfurt 4116042008

9. EUR Commerzbank AG Frankfurt 400871531000EUR

10. CHF Zurcher Kantonalbank Zurich 0700-01102.362

11. CAD The Bank of Nova Scotia Toronto 527120311618

12. ACU $ Standard Chartered Bank Kolkata 32205072554

American Express Bank Ltd.

13. ACU $ Kolkata 42705427087

14. ACU $ United Bank Limited Karachi 0680015-5

15. ACU $ Nepal Bangladesh Bank Ltd. Kathmandu 011031 D

16. ACU $ Standard Chartered Bank Colombo 15-9908498-93

The Bank of Tokyo Mitsubishi

17. ACU $ New Delhi 9000010

18. ACU $ Arab Bangladesh Bank Ltd. Mumbai 5001-000015-155

19. ACU $ ICICI Bank Limited Mumbai 000406000179

20. ACU $ Bank of Bhutan Phuenstholing 34020

21. ACU EUR Mashreqbank psc Mumbai 61049657

22. AUS $ National Australia Bank Melbourne 1803-088048-500

23. GBP HSBC Bank plc London 67033073scn: 40- 05-15 69

Tokyo &
24. JPY UBAF 10 282760 001 00 0

5.4 Findings from Southeast bank

Analysis of the survey

Gender & Customer Services of SEBL
Among the respondents were surveyed, 76% were male and the rest 24% were female.
The respondents were asked to rate their overall satisfaction with the bank on 5 points
scale where 5 represented the highest satisfaction score & 1, the lowest. The results show
that the mean satisfaction score of the female respondents were 3.87 whereas the male
respondents had a mean score of only 3.32. So, these imply females are more satisfied
with the service compared to the males. The results of the survey are shown below
according to the gender category of the respondents:

Q-5 Score Frequency %

Total Mean Score
1 2 3 4 5
Male - 13 18 36 9 76 3.32

Female 1 5 14 4 24 3.87

Using ATM card 70

Among the respondents were surveyed, 43% male and 12% female use ATM card from
100% male and female respectively. The results of the survey are shown below according
to the gender category of the respondents:

Q-11 (%)
Male 43
Female 12

Gender basis

Age group basis

Youngest people are the core user of ATM card then the oldest people and it is showed in
below: 71

Age group (%)

20-29 45%
30-39 32%
40-49 20%
50-59 2%
60-69 1%

Online service compare with traditional services

Much better 68%

Better 18% 72

Same 11%
Worse 3%

Responses on the phone

Q-20 Score Frequency %

1 2 3 4 5 Total
24 16 43 11 6 100

SWOT Analysis of SEBL E-Banking

SWOT analysis is one of the most acceptable yardsticks to measure the

gigantic performance of the management and provides notion about
the opportunity and threat of the company or company’s project.
SWOT analysis of SEBL’s E-Banking is


 Strong security counters measurement to provide 99.99% security about

customer’s privacy. PBL Data Center is equipped with world’s number ‘one’
networking equipment from CISCO, such as switch, router and PIX firewall. 73

 Well trained employees

 SEBL’s Online Banking web server is certified by 128 bit data encryption SSL
(Secure Socket Layer) server certificates issued by Verisign.
 Educated customers whose have positive notion about the changing technology.

 SEBL’s focus more now increasing the number of customers. But the authority
has no headache to increase the capacity of the server. So their system may collapse
due to overload any time.
 Due to large number of customers they may face security problem

 There is no ATM booth in the University campus as NBL has. But student may
be profitable customers in near future.
 Few number of ATM booth located in the only urban area. There is no one
ATM booth in the rural area.


o Customer’s psychological impression to use debit and credit card will be positive
aspects of exploring online banking.
o Of late expansion of fiber optic cable in Chittagong intensifies this opportunity
much more.
o Tejari, a Dubai based online marketplace, is to open offices in Bangladesh to offer
e-commerce services to exporters and so banking application will be aloofted.
o Expansion of mobile network over the country creates scope for online business
applications. Some companies already provided mobile internet services in the


 Now NCBs as well as PCBs are going to provide e-banking services.

So this is the main threat for SEBL’s online banking. 74

 As e-banking is wholly IT based, software as well as server capacity

has been updated over the period. The installation cost is also high. So it’s a
technological threat for SEBL’s online banking system because the end users take
the updated technological advantage. 75

Data Analysis

6.1 Telecommunication Status in Bangladesh

No of land lines 0.92 million

No of cellular phones 3.5 million
Paging and radio trunking subscribers 7000
Telex subscribers 1600
International trunk exchange 3
Total international circuits 3700
International internet backbone 10 mb
V-sat provider 31
V-sat user 70
Number of ISP’s 195
Fiber optic cable network(under railway) 1800 km
Internet users 0.1 million

Fig-6.1: Telecommunication Status In Bangladesh

6.2 Status of Computerization and Electronic Banking System in Bangladesh

To draw an assumption about the current condition of OB, a survey is conducted in 2

national and 14 private banks. Participant banks are Dutch Bangla Bank Ltd, Premier
Bank Ltd, First Security Bank Ltd, Dhaka Bank Ltd, The City Bank Ltd, Exim Bank Ltd,
Jamuna Bank Ltd, Prime Bank Ltd, NCC Bank Ltd, Eastern Bank Ltd, United
Commercial Bank Ltd, Trust Bank Ltd, Uttra Bank Ltd and BRAC Bank Ltd.

The use of online banking in the national bank is zero. Only the service of linking A/Cs
online is present in Public Bank, but other services are absent in both the NCBs.

The scenario in PCB is better. Among 14 surveyed banks, four banks (like Premier Bank
Ltd, First Security Bank ltd, Dhaka Bank Ltd, Exim Bank Ltd) are only applying minor
activities of online banking services. 76

Linking A/Cs online and foreign exchange rate update-these two services are provided by
remaining 10 banks. Besides these, the task of branch transactions, fund transfer, bank
statement, paying utility bills and checking account balances can be done through online
in these banks.

Financial sector of Bangladesh, like most developing countries, is dominated by banking

enterprises. Banks at early stages of history of Bangladesh were nationalized and there
was mismatch between assets and liabilities. In the early 1980s, the government of
Bangladesh began to reform the financial sector. Private Banks were allowed to enter the
market and two nationalized commercial banks (NCBs) were decentralized and another
nationalized bank was converted into a limited liability company and partially privatized.
Currently, the banking sector comprises of four NCBs, five government-owned
specialized banks dealing with development finance in specialized sectors, 30 private
commercial banks (PCBs) and ten foreign commercial banks (FCBs) (Ahmad, 2005).

There are a total of 49 scheduled public and private banks in the country. Here there are
four state owned commercial banks (Nationalized Commercial Banks-NCBs) have 3496
branches, five specialized banks (DFIs) have 1311 branches, 30 local private commercial
banks (Private Commercial Banks-PCBs) have branches of the scheduled banks in the
country. The banking system of our country, depending on computerization can be
classified into three categories: (i.)Completely computerized (ii.) Partially computerized
(iii) Not computerized. Standard Chartered Grindlays Bank Ltd., City Bank NA,
American Express Bank, HSBC etc are completely computerized banks in our country.
All privates and state owned banks are partially computerized and not computerized. The
overall picture of computerization in the banking sector of our country presented in the
following table (Raihan ).

Branches with various facilities Availability in Banks

Computerized Branches 19% 38% 100%
Number of Branches Linked within branches 3% 1% 76%
Number of Branches Linked with other branches 0.86 22% 76%
Table-6.2.1 Computerized Branches in different types of Commercial Banks 77

The overall computer density in the banking sector is 1.64. For foreign commercial banks
(FCBs) the computer density is 45.34, where as for NCBs the ratio is only 0.41. The
specialized bank scenario is almost same as the NCBs, 0.43. On the other hand, private
commercial banks have comparatively higher ratio, 4.94. As a whole 81.81 percent bank
does not have any local area network (LAN), 30 percent have WAN (Wide Area
Network) but for some banks many branches are outside of WAN connectivity. At
present, all of the foreign banks of our country are using online banking system, they are
invested a lot for their automation banking services. For this reason, they are increasing
market share every year. They are the pioneer of implementing electronic banking
systems in Bangladesh, but now most of the private banks of our country are using
electronic banking systems.

Recently a number of commercial banks of Bangladesh have become the member of

Belgium based Society for Worldwide Interbank Financial Telecommunication (SWIFT).
For international payment settlement 33 percent of banks are using now SWIFT. With the
activation of the SWIFT system banks enjoy instant, low-cost, speedy and reliable
connectivity for L/C transmission, fund transfers, message communication and worldwide
financial activities. Earlier only foreign banks of this country were availing this
facility(Rahman, A, 2001).
In our country different banks are offering electronic banking services in different ways,
some are offering ATM (Automatic Teller Machine) services, some are tele-banking and
some are electronic fund transfer, debit card, credit card etc. The following table shows
the different electronic banking services in our country (Raihan, A, 2001).
Sl. Electronic Banking 2004 2005 2006
1. ATM 25 34 48
2. Merchant account service ----- 13.8 21
to merchant
3. Internet Banking --------- 16 22
4. SMS Banking ------- -------- -------
5. Debit card --- 13 28 --------- 13 28
6. . Electronic Fund Transfer 27 25 36
7. Online corporate banking ---------- 17 28
8. Credit card 10 23 ------
9. Any Branch Banking ------- ---------- ------ 78

10. Tele-banking 35 46 54
11. Point Of Sales (POS) Service ---- ------- -------
12. Remittance (Electronic Way) ------ ----- ------
13. Call Center ------ ------ -------
14. SWIFT Channel -------- ---- 30
15. Web Shopping On Internet ----- --- -----
Table-6.2.2 Electronic Banking Services in Bangladesh [% of Banks]
(---= service not significant Amount)

The above table shows the different electronic banking services are increasing day by day
in Bangladesh.

6.3 Present Status E-Banking in Bangladesh

Present Status of Various forms of E-Banking in Bangladesh: Total 40 banks (both public
and Pvt. Commercial banks) were surveyed and the results are summarized as below:

Sl. Various Forms of E-Banking Number of Banks having %

Services on line modes of service N/40
01. ATM 30 .75
02. SMS Banking 19 .475
03. Electronic Fund Transfer (EFT) 22 .55
04. Virtual Banking 7 .175
05. Internet Banking and WAP 21 .525
06. Any Branch Banking 35 .875
07. Tele-banking 21 .525
08. Point Of Sales (POS) Service 35 .825
09. Remittance (Electronic Way) 31 .775
10. Call Center 7 .175
11. SWIFT Channel 40 1
12. Web Shopping On Internet A A
Table-6.3 Position of E-Banking in Bangladesh, A= Not Available in BD
6.4 Demography of Users And Non-Users Of Online Banking Services
Out of 300 consumers of online banks 252 (85.3%) are male and 48 (14.7%) are female.
In comparison of user and non-user based on gender, female 22.9% are found non user
which is nearly 10% greater than user’s family.
Variables Category’s Combined Users Non users
Frequency % Frequency % Frequency %
Gender Male 256 85.3 219 86.9 37 77.1
Female 44 14.7 33 13.1 11 22.9
Profession Business 93 31 82 32.5 11 22.9
Service 123 41 95 37.7 28 58.3 79

Student 70 23.2 64 25.4 6 12.5

House wife 14 4.4 11 4.4 3 6.3

Fig-6.4: Demography of Users and Non-Users Of Online Banking Services.

Business & service groups are the dominant users of online banking among the
professionals that belongs to 32.5% and 37.7%.We may expect that with in very near
future the using rate will be reached in a satisfactory level.

6.5 Estimated ICT Human Resource Demand over the Next Five Years

Table 6.5, below, gives a rough idea of the demand for skilled labor over the next few
years. These estimates are based on knowledge gained through activity in the sector over
the last four years as well as interviews with all three industry associations.

Sector Number of Estimated

Institutions Number of
(rounded) Professionals
1 Universities and Tertiary 4000 8000
Institutions (2 @
each institute)
2 Secondary Schools (1 @ each) 10000 10000
3 Primary schools (1 @ each) 30000 30000
4 Government/armed forces (100 30 3000
per Ministry,
branches and its dept)
5 Financial Institutions (1 per 2000 2000
6 Telecomm Service Providers, 10000 10000
ISPs, Cafes (per
estimate of ISPBA)
7 Industry and other private 2000 2000
enterprises (for
large industries and ICT SMEs)
8 NGOs and Missions (1 per) 20000 20000 80

Total Need 85,000

Table 6.5: Estimated ICT Human Resource Demand over the Next Five Years

6.6. Prospects of the e-banking in Bangladesh

A magnificent prospect of dispelling the e-banking in Bangladesh prevails due to the

following foreheads:

Expansion of Mobile Network

Expansion of mobile network over the country creates scope for online business
applications. Some companies already provided mobile internet services in the country.

Expansion of ISPS
The number of ISPS has grown to 195 with individual band with ranging from 34 KBPS
to 2 MBPS, offering broad band internet services through DSL/HDSL.

Internet Coverage by BTCL through Dial up Connections

All 65 districts and 35% Upazillas in Bangladesh have been brought under internet
coverage by BTCL through dial up connections.

No of IT Educated People Increased

The number of computers in the country is about 0.5 million with about 0.1 million
internet users that is increasing at an increasing rate.

Expanding Banking Business

As no of private as well as foreign banks are increasing continuously, NCBs are
compelled to introduce online banking to sustain in the market.

Digitized Shopping Mall and Air Lines

Shopping malls and air lines are transformed into digital one.

Regulatory Support 81

Certain regulations such as IPR bill, the evidence act have the capability of facilitating the
scope of online banking in Bangladesh.

Expansion ICT
A considerable number of manpower’s are available who have a potent ICT knowledge.
Some others clues are:
 Customer’s psychological impression to use debit and credit card will be positive
aspects of exploring online banking.
 Of late expansion of fiber optic cable in Chittagong intensifies this opportunity
much more.
 Tejari, a Dubai based online marketplace, is to open offices in Bangladesh to offer
e-commerce services to exporters and so banking application will be lofted.
 Citi’s global transaction services business announced a set of cross border
remittance services for the corporate and banking markets.

6.7. Government Policy of E-Banking

In order to expansion of e-banking, in august 2001, center for policy dialogue (CPD)
articulated several principles that could be the foundation for government policy in
Bangladesh, includes:

 Promoting and preserving competition by introducing competition to monopoly phone

markets, and ensuring interconnection at fair prices.
 Guaranteeing open access to networks on a discriminatory basis, so that users have
access to the broadest range of information and services.
 The automation of Bangladesh and other financial institutions should be based on
comprehensive strategic plan.
 Central bank should provide some market incentive for the banks to implement ICT in
the financial sector.
 Bangladesh bank can set up mandate for the banks to recruit new entrants with
compulsory ICT education.
 There should be a comprehensive plan to modernize the operation of the central bank
to support automated clearing service and update supervisory and regulatory rules for
absorbing ICT-based banking. 82

 An awareness campaign should be organized through workshop and seminar on the

importance and business value of ICT in financial institutions for creating awareness
among the top management.
 Bangladesh bank should work out an efficient information infrastructure for banks
using different technology to ensure network connectivity among the commercial
banks and financial institutions in Bangladesh.
 A pilot project should be undertaken immediately to set up a payment server within
country for receiving payment for e-commerce.
 For attracting foreign currency through e-commerce and online banking Bangladesh
bank should undertake a pilot project to experiment the crosscutting issues.
 Permit low limit international credit card (ICC) for individuals against passport.
Educational institutions will be facilitated to procure books and other educational
materials using ICT.
 Legal infrastructure is a must for implementing ICT-based banking services.
Bangladesh bank along with the concerned agencies should work out a plan to
develop and enact the following regulatory documents: e-banking regulation, digital
signature law, dispute settlement law, amendment in evidence act, etc.

Central bank may form a "center for online banking technology and management" to
support the banks with latest technological development in the banking world and provide
expert support for ICT implementation.

6.8 SWOT Analysis of E-banking Infrastructure Development in BD

6.8.1 Strength for E-banking Infrastructure Development in BD

• Rapid Growth of Telecommunication

• Opportunity for Mobile Banking
• Growth of Internet
• Rapid popularity of Electronic medium
• Export-Oriented Industry
• Growth of International Trade and Transactions
• Non Resident Bangladeshi (NRB) People 83

• Government Initiatives
• Sound Banking Sector
• Information Infrastructure
• Telecommunications
• ICT Penetration in Financial Sector

6.8.2Weakness of E-banking Infrastructure Development in BD

• Lack of Technological Advancement

• Lack of ability to copy with the latest Technology
• High start up cost
• Mass Illiteracy Level
• Lack of ICT Knowledge and Skills
• Power Disruption
• Establishment Expenses
• Lack of Awareness and Understanding of the Value of E-Banking
• Unavailability of E-Business Practices
• Legal Framework
• Socio-Cultural Aspects
• Security
• Standardization of Software
• Lack of Initiative from Central Bank
• Lack of Compliance
• Lack of ATM
• Employment Issue
• ATM’s fall short of money
• Slow bandwidth of internet may delay the transfer rate. (radio link and cable are
used for internet)
• Bankers make delay to provide PIN number whenever client lose his Credit or
Debit card
• Charges are higher for the card. 84

6.8.3 Opportunities of E-Banking Infrastructure Development in Bangladesh:

The infrastructure covers the major cost of any electronic banking system. But it’s a
matter of huge investment for a country like Bangladesh. But fortunately Bangladesh
Railway has a high-speed optical fiber network parallel to the railway path owned by
Bangladesh Railway which has a total capacity of about 2.5 Gbps. This fiber optic
network covers almost every important parts of the country. So, it is an opportunity to use
it as the backbone network of electronic banking in Bangladesh. Some of the
multinational companies like Grameen mobile phone company, Ranks ITT of Bangladesh
have already started to use this high-speed optical fiber network and they are providing
their services even in rural area. So we can utilize this opportunity in case of E-banking in
In Bangladesh there is a large gap between the computerization of foreign banks and that
of local commercial banks (the gap is particularly great in respect of local public
commercial banks) and as regards the state of their intra- and inter branch online
networks. However, 75 per cent of local banks are planning to introduce E-Banking,
which implies very dynamic improvements in their ICT use indicators. Virtually all banks
use banking software at their head offices and during the past few years around one third
of local banks has become SWIFT members. Credit card and point of sale services (POS)
are already provided by a quarter of local banks, while ATM and internet banking are
expanding rapidly especially in major cities.
Next Generation Network (NGN) Project, Proposed 2nd Submarine cable, Wi-MAX
license to two companies in Budget 2010-11 are great opportunity for E-Banking
infrastructure expansion & development

6.8.4Threats of E-Banking Infrastructure Development in Bangladesh:

• System design, implementation and maintenance

• Customer misuse of products and services
• Strategic risk from management perspective
• Security risks
• Reputational risk
• Credit risk
• Liquidity risk 85

• Operational risk
• Market risk
• Legal risk

Traditional banking risks such as credit risk, liquidity risk and market risk are also present
in e-banking sectors 86


Cost Benefit Analysis

Cost-benefit analysis is mainly, but not exclusively, used to assess the value for money of
very large private and public sector projects. This is because such projects tend to include
costs and benefits that are less amenable to being expressed in financial or monetary
terms (e.g. environmental damage), as well as those that can be expressed in monetary

7.1. Definition of CBA

Cost-Benefit Analysis (CBA) estimates and totals up the equivalent money value of the
benefits and costs to the community of projects to establish whether they are worthwhile.

7.2. Principles of Cost-Benefit Analysis

One of the problems of CBA is that the computation of many components of benefits and
costs is intuitively obvious but that there are others for which intuition fails to suggest
methods of measurement. Therefore some basic principles are needed as a guide.

1. There Must Be a Common Unit of Measurement

2. CBA Valuations Should Represent Consumers or Producers Valuations As

Revealed by Their Actual Behavior

3. Benefits Are Usually Measured by Market Choices

4. Some Measurements of Benefits Require the Valuation of Human Life

5. The Analysis of a Project Should Involve a With Versus Without Comparison

6. The Analysis of a Project Should Involve a With Versus Without Comparison

7. Double Counting of Benefits or Costs Must be avoided

8. Decision Criteria for Projects 87

7.3 Some Examples of CBA

For SCBA I consider the following variables
 Transferring fund from remote area
 Letter of credit(L/C)
 Reduce Charge
 CIB report generation
 Connectivity with the port authority
 Assuring exchange rate

7.3.1. Transferring Fund from Remote Area

These are one of the most vital activities of bank. It is particularly very important for
For example, a person having an account in branch X at capital city (C) wants to draw
cash from branch Y located at some remote area (R).In the case of existing system
followings are steps followed for the above service.

-Branch Y receives application from customer and prepares required papers.

-Then branch Y sends those papers to branch X (at C) usually by courier service.
-Branch X then receives papers, checks them and finds correct.
-Branch X finally sends OK report (by courier service) favoring the person.
-Branch Y then transfer cash to the customer.
In case of transferring fund from a bank to another bank requires some sort of steps plus
the overhead of ‘clearing house’, which is governed by Bangladesh Bank. Using the
above steps roughly estimated time for inter branch/bank fund transfer ranges from 3 days
to 20 days depending upon the efficiency of the bank and distance between two banks. To
make the calculation simple, we consider that each such transaction on an average takes a
period of 7 days.
It is to note that during this transferring period the fund is not being utilized by any of the
Now we consider the following real example to find out the benefit of the proposed
system. We consider that the above process comes under the proposed e-banking
infrastructure. So it performs all remittance functions in real time. The long delay of 7 88

days is absorbed to nil. Assuming yearly interest rate as 13% we can find out the net
profit calculated over this delay of 7 days.
Net profit = (7x13x25480) / (365x100) = 63.52 (amount in lac TK.)

Concluding Remarks:
If the above function is done with the traditional banking system society will incur a loss
amount to tk 63.52 (lac).But under the online banking system society will gain by
expediting the transaction. So from the social perspective the online banking project is

7.3.2. Letter of Credit (L/C)

In general an L/C operation consists of two parts. They are dealing with the payments and
other one is shipment of goods. The total process typically takes 25 days (it is subject to
change due to many factors) in the following way (shown in figure 6.1)
(A) 6 days (pre-shipment)
(B) 4 days (goods delivery from ports)
©15 days (goods shipment process)
Through internet banking delay due to pre-shipment and post-shipment process is fully
eliminated. That means only15 days requires to entire process. On an average, online L/C
processing reduces the total time period by 60%. Consequently, it increases the number of
L/C by the same ratio.
Reduced Charge
Followings are the charges for L/C operation by the bank using traditional system:
(amount in TK)
1. Commission .5%
2. VAT 15% on commission
3. SWIFT charge 3500/=
4. Foreign Courier Charge 1000/=
5. Stamp 150/=
6. Securities & others 200/=
1 USD=taka 69(approx.)
Through the online, it can now send or receive any information in a secured way within a
fraction of seconds .As now the total process comes under electronic transfer there is
almost no need to prepare and scrutinize papers manually. So it becomes easier and 89

convenient to process an L/C operation. Therefore, bank now can lower its commission at
least at .25% instead of .5%. Foreign Courier Charge will be sharply reduced to TK.100/=
(including some electronic message transfer charge. Suppose other charges remain same).

Under E-Banking System Traditional Banking System

Commission .25% .5%
VAT on commission 15% 15%
SWIFT charge 3500 3500
Foreign Courier Charge 100 1000
Stamp 150 150
Securities & others 200 200
T- Charges for LC under The Both System
Let a business man needs L/C to import rice amount to tk 7500000.The cost of the
businessman under the both system will be:

Under Ob System Traditional Banking System

=(7500000*.25%)+(18750*15%) =(7500000*.5%) + (37500*15%) +
+3500+100+150+200) 3500+1000+150+200
=18750+2812.5+4850 =37500+5625+4850
=25512.5 =479750

Concluding Remarks:
I may conclude that online banking could able to provide optimum benefit to the
members of the society. As a whole society is benefited insinuately and the extra amount
that was charged under traditional banking system can be invested to the productive
sectors and benefits derive from that project to the society.
So, online banking project is viable for the society.

7.3.3. CIB Report Generation

Bangladesh Bank has the access to all other banks so it is very easy task to maintain an
integrated database of all customers specifying their credit and debit information with
each bank. At present one wishing to go for any project first seeks bank for loan. The
bank then first verifies the viability of the project from different points of view. Then the 90

bank contacts Credit Information Bureau (CIB) at central bank .CIB checks all related
papers and other documents regarding the person and finally send a reply stating the
summery of his past transactions. Depending upon the report sent from CIB the bank
either accepts or rejects to sanction loan for the person/persons. Above process of
generating CIB report requires on an average of 20 days. This delay is due to the manual
procedure of verification. By contrast the proposed electronic banking system is capable
to do same job in an efficient way. The Central Bank can generate the CIB report within
seconds using its integrated database for the customers.
Mr X wants to take a car loan from TBL in Sylhet branch. After completing the
application form, TBL will send it to the CIB to discern the application that will take one
month due to the manual procedure of verification. The social cost of that community will
be like this:

-The people have to expend an hour and to pay tk25.
-If car moves the cost would be tk5 per person and take 15 minutes.
-Every day 100 people travel from Golapgonj to Sylhet
So the amount paid by 100 people is = (25 X 100X30) = tk75000
Time required = (100X1X30) = 300 hours
But the Central Bank can generate the CIB report within seconds using its integrated
database for the customers. If all things are positive it will take two days to provide the
loan by the TBL.
So the amount paid by 100 people is = 5 X 100X30 = 15000
Time required = 100X15X30 = 4500/60=75 hours
Social cost = (75000 – 15000) = tk50000
Time lost = (100-75) = 25 hours]
Concluding Remarks:
If online banking services are available the social benefit would be tk50000 and time
saved 25 hours. No doubt about the social benefit of the online banking.

7.3.4 Connectivity with the Port Authority

Under the proposed configuration every bank is directly connected with the ports
authority (sea and air). Currently, disbursement of goods from ports requires much time 91

due to processing and clearing of required papers. The trader now sometimes gets the
papers from his bank and deposits them to the port authority. The unexpected delay will
be removed using a direct communication channel with the port authority.
Suppose, Lack of proper documents the fossil fuel has not been released by the ports
authority of Chittagong. And it will take 7 days to submit the necessary documents as no
online banking services are present in the country. Result is that the price of fossil fuel
will rise from tk 48 to tk 55 due to more demand over supply. So society suffers tk 7
more in per litter.

Concluding Remarks:
If online banking facility prevails in the country, the importer could submit their
documents properly and society could enjoy the fruits. So there is no debate regarding e-
banking from the society’s view point.

7.3.5. Assuring Floating Exchange Rate

This is one of the important role that the proposed system will play currently the Central
Bank, the beginning of the day, declares major exchange rate. Each Head Office (HO)
collects that information from the Central Bank usually over the telephone. After some
interval the rate might change but due to the lack of online connectivity with the Central
Bank each HO gets the changed exchange rate information with some significant delay.
This delay might cause heavy loss for the bank or for the customer. Here lies the
necessity of assuring floating point exchange rate. The proposed system can very well
establish the requirement of the floating exchange rate using online message broadcast
from the central bank.

Let an example, X, an importer of Barisal, has made a contract to Y an exporter of India,

to purchase 1000 metric ton rice at the current exchange rate. When X is going to make
payment, he knows the exchange rate is $1= tk 68 from the bank by which he will make
his transaction. Under this state the scenario will be

Total rice = 1000*1000 = 1000000 KG

Total Price = 1000000 * 32 = tk 32000000
Importer pays to exporter = 32000000/68 92

Now assume that the importer will charge per kg at tk 36 after considering all costs.
But within mean time the exchange rate has been changed from tk 68 to tk 69.5 that was
not available to the office of Barisal due to lack of information system. Under the new
exchange rate importer will pay to exporter = 32000000 / 69.5 = $460432 and the rice per
kg would be priced to tk 40 by the importer adding all costs. So the common people
would have to pay more tk 4 (40-36) per kg now.

Concluding Remarks:
If E-banking services are available in Barisal, the fluctuating exchange rate will reach in
time. And the society is benefited by paying tk 4 less per kg.
So e-banking again proves itself healthful to the society. 93

Findings & Recommendations

8.1 Findings
The findings of my study are-
 In the context of Bangladesh, both educated and uneducated people are very much
unaware about the IT .This unconsciousness creates the other hindrances like
techno phobia, lack of security and privacy.
 Most of the people of our country are reluctant to change the traditional
personalized procedures.
 Sometimes people are aware and interested enough to replace the traditional
method with the IT, but do not have enough money and infrastructure support.
 Internet network is not available over the whole country.
 Though the online banking in Bangladesh is infancy stage, it is expanding rapidly.
 In SEBL, there is no ATM booth in the University campus as 3% of the total users
are student.
 If we observe the consumer behavior of online banking either Bangladesh
perspective or SEBL perspective, we see that female participants are very poor
and needless to say of rural and most of the urban housewives.
 No initiatives have been taken to attract the female users.
 SEBL has provided online banking services only the divisions, major city
corporations and port area.
 Conspicuous aspects of SEBL e-banking consumers are highly educated who are
very much optimistic about change.
 The server capacity is not the latest version.


 Creating awareness among the NCBs and local PCBs management

regarding online banking is essential. Bangladesh bank can play a major role at
this juncture by highlighting the benefits of online banking to the schedule banks
and encourage them to use customized software for their day to day operations. 94

 Technological and infrastructural barriers can be overcome if existing laws

and regulations are implemented.
 Barrier of cost can be resolved through lessening the dependency on
imported technology from foreign countries.
 Both NCBs and PCBs should extend their online banking services.
 Government policy should be favorable for the online banking expansion.

E-banking means today, web based banking. Today banks are embracing web technology
to offer more services at a cost effective rate. Although in late Bangladeshi commercial
banks put forward themselves to gain that competitive advantage. If these
recommendations are followed perfectly by the concerned, it is not so far that Bangladesh
will embrace the benefits of IT in the full extent and get one of highest rates in the
adoption of IT as well as OB through out the world. 95

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